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PLN estimates revenues to slip 15% below target

Indonesia’s sole electricity distributor, state-owned PLN, expects its revenues to fall about 15 percent below expectations this year amid weakening demand, particularly in the country’s industrial heartland of Java, but also on other islands

Norman Harsono (The Jakarta Post)
Jakarta
Mon, April 27, 2020

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PLN estimates revenues to slip 15% below target

I

ndonesia’s sole electricity distributor, state-owned PLN, expects its revenues to fall about 15 percent below expectations this year amid weakening demand, particularly in the country’s industrial heartland of Java, but also on other islands.

PLN president director Zulkifli Zaini said on Wednesday that the company expected demand to decline by 9.7 percent from the initial target, as emergency measures imposed by the government to halt the spread of COVID-19 had paralyzed many business activities, such as hotel and retail industries.

With such a decline, PLN’s revenues are expected to reach Rp 257 trillion (US$16.47 billion) this year, 14.7 percent below the initial target of Rp 301 trillion, he said.

“Each 1 percent fall in electricity demand means PLN’s revenue falls Rp 2.8 trillion, as a rule of thumb,” Zulkifli told House of Representative members via video conference.

He added that PLN had Rp 35 trillion in loans due this year. The company was in talks with banks to extend the maturity of the loans to next year.

PLN’s revision follows that of national oil giant Pertamina and gas distributor PGN. All three national companies’ sales have been hit hard by the shutdown of businesses and industries, most of which are located on Java Island.

Java Island is also Indonesia’s epicenter for COVID-19, accounting for over 80 percent of nationwide deaths. Many cities on the island, such as Jakarta, its surrounding areas and Bandung in West Java, have imposed partial lockdowns to curb the spread of the disease.

Partial lockdown regulations — officially called large-scale social restrictions (PSBB) — require all industries to close their workplaces, except those considered to be “strategic”, such as food, medicine, mining and plantations.

“COVID-19’s greatest impact on the energy sector is reducing energy demand,” said Fabby Tumiwa of energy think tank Institute for Essential Services Reform (IESR).

PLN data presented during the hearing shows that out of all PLN regions, the Java-Bali region has experienced the sharpest decline in power demand. Regional consumption in the second week of April was 9.55 percent lower than in the same week last year.

Many cities within the region, including the Greater Jakarta economic hub, implemented partial lockdowns this month. The region contributes around 72 percent of PLN’s annual revenue.

Zulkifli said the slowdown of major construction projects, most of which are also located in Java, added to the drop in regional demand. Many projects are being impeded by supply chain breakdowns and mobility restrictions.

He added that the tourist hotspot island of Bali “experienced the sharpest decline in power at almost 20 percent”, after hotels, restaurants, entertainment venues suspended operations. Indonesia’s tourism has been the hardest-hit among other sectors.

“A place with one-way traffic like Lombok [West Nusa Tenggara] and Bali, where outbound travel is low, their travel activity is totally 100 percent finished,” said Association of Air Ticketing Companies in Indonesia (Astindo) secretary-general Pauline Suharno.

In comparison, power consumption in five non-Java-Bali regions slipped less than 6 percent over the same period, PLN data shows. These poorer regions, aside from having fewer COVID-19 cases, are predominantly mining and plantation economies.

West Kalimantan and Sumatra, whose biggest exports are metal ores and palm oil, experienced a 3.46 percent and 2.05 percent decline in electricity consumption, respectively.

Northern Sulawesi, which is an exporter of vegetable oil and corn, experienced a 5.69 percent decline in consumption, the steepest among the non-Java regions. Papua, which is Indonesia’s poorest province, was not mentioned in the video conference.

“Right now it’s very difficult to predict when this pandemic will end. The situation is very dynamic,” said Zulkifli.

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