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Jakarta Post

PLN slashes capital expenditure by half this year

  • Norman Harsono
    Norman Harsono

    The Jakarta Post

Jakarta   /   Fri, June 26, 2020   /   05:02 pm
PLN slashes capital expenditure by half this year PLN president director Zulkifli Zaini speaks in front of House of Representatives (DPR) Commission VII overseeing energy in Jakarta on June 17. The commission grilled PLN about recent spikes in household power bills. (PLN/PLN)

State-owned electricity company PLN has slashed its capital expenditure (capex) for this year by almost half to Rp 53.6 trillion (US$3.7 billion) from an initially earmarked Rp 100 trillion.

PLN president director Zulkifli Zaini said on Thursday that the company would prioritize funding for projects slated for completion this year, including power plant, power lines and substations.

“We will adjust the funding for projects that can be postponed, while mitigating risks, so that it does not significantly affect our electricity system,” Zulkifli told lawmakers at the House of Representatives (DPR) in Jakarta, without specifying the projects.

Slashing expenditure this year was important to maintain the company’s finances amid decreasing electricity consumption during the COVID-19 pandemic, he added.

“We also need to maintain our financial condition, assessing the investment cost in relation to changing electricity demand due to COVID-19. This assessment is done carefully, because there is a high degree of uncertainty due to the pandemic; we can’t do business as usual,” Zulkifli said.

The large-scale social restrictions (PSBB) regime to contain the virus has forced many businesses to shut temporarily or permanently, which has also led to lower electricity consumption among PLN’s corporate clients.

PLN, which has the monopoly in domestic electricity distribution, had planned to build new electricity infrastructure this year, including 4,459 kilometers of power lines and 14,247 megavolt-ampere worth of substations.

In January, the company raised Rp 4.9 trillion from the issuance of conventional bonds and sukuk (sharia-compliant bonds) to finance its expansion.

The company also has also faced delays with the completion of 11 large coal-fired power plants as supply chains broke down in this year’s first quarter, following global lockdowns.

The company booked a net loss of Rp 38.9 trillion in the January to March period, down from a net profit of Rp 4.12 trillion in the same period last year, its financial report showed.

Meanwhile, the cut in the PLN’s expenditure is in line with an order by State-Owned Enterprises (SOE) Minister Erick Thohir to cut the company’s capex by up to 40 percent to push for efficiency.

“Sometimes capex can be turned into ‘projects’, especially when the supply chain and demand aren’t obvious,” he told reporters at an online press conference on June 12.

The order is also seen as part of major restructuring among state-owned enterprises.

“Hopefully, there isn't any playing with projects."