The current administration wants to generate 35,000 MW from power plants and build 46,760 kilometers worth of transmission circuits and 1,375 substation units equivalent to 108,789 mega volt amperes (MVA) by 2019 with a combined investment value of Rp 1.2 quadrillion.

It is estimated that PLN must disburse Rp 585 trillion for the development of this infrastructure, Rp 200 trillion of which will be allocated for power plants with a total capacity of 10,000 MW and the rest for transmission circuits and substation units.

However, as of August, PLN has only been able to seal financing commitments worth Rp 117 trillion, including commitments from the World Bank and the Asian Development Bank. Of that figure, only Rp 62 trillion worth of debt has been disbursed.

“As of today, we have only been able to secure Rp 117 trillion in financing commitments. Hence, we will try our best to find other sources of financing so we can realize the 35,000 MW program,” PLN director Syamsul Huda said recently.

PLN has come into the spotlight lately following the leak of a letter dated Sept. 19 from Finance Minister Sri Mulyani Indrawati to Energy and Mineral Resources Minister Ignasius Jonan, State-Owned Enterprises (SOE) Minister Rini Soemarno and PLN president director Sofyan Basir.

In the letter, Sri Mulyani underlined PLN’s poor financial performance amid its obligation to pay principal and interest payments. She said such a situation had forced the government to request a three-year waiver to the firm’s lenders to avoid a cross default debt after PLN failed to maintain covenant in its loan agreement.

Responding to this matter, Rini said there was nothing to worry about because Sri Mulyani was simply reminding PLN to keep its debt in check.

By the end of the first half of this year, PLN’s liabilities reached Rp 420.5 trillion, a 9.8 percent increase year-on-year. Its net profits plunged 71.7 percent to Rp 2.24 trillion.

This came in the wake of PLN’s decreased growth in electricity sales, which only climbed 1.17 percent year-on-year to 108.4 terawatt hours (TWh), far below the growth rate of 7.85 percent recorded in the first six months of 2016.

Jonan previously said that plants generating 17,000 MW in the 35,000 MW program would be operational by 2019, an adjustment to slowing electricity demand and economic growth. Plants generating 18,000 MW will commence operations between 2023 and 2025, he added.

As of June, plants generating 768 MW had started commercial operations, while facilities designed to generate 14,193 MW were under construction. Plants with a combined capacity of 8,550 MW have signed power purchase agreements (PPAs). The remaining 12,325 MW in new plants are still in the planning and procurement phases.

The government has been trying to lure in more private investors to participate in electricity projects by offering various facilities including viability gap funds (VGF) and availability payments. Through the VGF facility, for instance, the government can help PLN boost the internal rate of return (IRR) of a project offered through a tender.

“So, if the IRR for an electricity infrastructure project is only 6 percent, while the ideal figure is 12 percent, the government can inject another 6 percent to make the project more attractive,” said Armand Hermawan, the finance director for state-owned infrastructure project financing guarantee agency PT Penjaminan Infrastruktur Indonesia.

Unfortunately, he continued, not many SOEs used the VGF facility, even though it was an important instrument to attract more investors as the government alone couldn’t finance all of the infrastructure development.

The current administration expects to disburse $358 billion for infrastructure development by 2019, $147 billion of which will be sourced from the state budget.

— Rachmadea Aisyah contributed to this story

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