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Cash-strapped PLN steers away from green energy
PLN recently cut its power offtake from several small-scale hydropower plants in North Sumatra due to financial constraints.
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Employees of state electricity company PLN replace electricity meters at the Taman Palem Lestari housing complex in Cengkareng, West Jakarta. (JP/Donny Fernando)
T
he COVID-19 pandemic has hit state-owned electricity giant PLN like a brick, adding to its problems over the past five years that have eroded the company’s finances and thus its ability to develop green energy.
Analysts say PLN's financial circumstances put at immediate risk Indonesia’s clean energy goals as the company is bogged down by the government’s 35GW program, 60 percent of which is coal plants, while other virus-stricken economies shift away from the fossil fuel.
“PLN’s quiet crisis reflects dysfunctional planning and governance that have put the company into strategic paralysis,” said analyst Elrika Hamdi of the Institute for Energy Economics and Financial Analysis (IEEFA) in a recent report.
PLN saw key debts and expenses swell between 2015 and 2019 due to President Joko “Jokowi” Widodo’s massive 35 gigawatts (GW) power plant construction plan. As a result, the company has become dependent on government support, including from the state budget, to keep going.
PLN is not only building one-fourth of the total 35GW but also incentivizing the remaining three-fourths, which are being built by independent power producers (IPPs). The incentive, called the Take-or-Pay policy, guarantees that PLN will buy minimal amounts of power from IPPs.
PLN’s bank and bond debts doubled during 2015 to 2019 to nearly Rp 400 trillion (US$26.75 billion) in developing the new plants, the company’s financial reports show.
