Gap Funding of PLN Investment of IDR 108.67 Trillion

POWER PLANT PROJECT - JAKARTA. The Ministry of Energy and Mineral Resources (ESDM) has requested that funding obstacles for PT PLN's power plant and transmission projects be resolved promptly. This would allow for smoother execution of the Electricity Supply Business Plan (RUPTL) 2021-2030.

The Audit Board (BPK) found a funding gap in PT PLN's investment of IDR 108.67 trillion for 2021 and 2022, which will affect the development targets according to the RUPTL 2021-2030.

Based on PT PLN's Work Plan and Corporate Budget (RKAP), the investment needed in 2021 is IDR 78.9 trillion, and in 2022 is IDR 73.10 trillion. From this amount, PLN can only fulfill IDR 19.93 trillion for 2021 and IDR 23.4 trillion for 2022.

Therefore, there is a funding gap of IDR 58.97 trillion in 2021 and IDR 49.7 trillion in 2022. The remaining needs have not been met by PLN, so new funding sources are needed.

The audit results are contained in the Audit Report on the Performance of Coal, Natural Gas, and Renewable Energy Management in the Development of the Electricity Sector to Ensure Availability, Affordability, and Energy Sustainability for the Fiscal Year 2020 to the First Semester of 2022.

The Minister of Energy and Mineral Resources (ESDM) Arifin Tasrif declined to comment further on the funding gap as it falls within the corporate realm of PLN.

“We may need to check what caused the lack (of funding). But it should be made easier if it's difficult,” he said at the ESDM Ministry Building, Friday (2/2).

According to him, PLN's infrastructure and power plant projects in the RUPTL are already included in the plan approved by the government.

“If the ESDM Ministry has planned something, it should be pushed to completion,” he emphasized.

IESR Executive Director Fabby Tumiwa admitted to being somewhat surprised by the large funding gap in PLN's investment plan. This means PLN cannot meet investment needs of IDR 70 trillion per year to implement the RUPTL.

He suspects that the funding difficulty is due to PLN's poor financial fundamentals. However, this assumption somewhat contradicts PLN's financial performance in 2021-2022, which recorded the best profit in history.

According to previous records, PLN posted a net profit of IDR 14.4 trillion or an increase of 9.4% year on year (yoy) compared to 2021. This achievement is even 124% higher than the government's target of IDR 6.4 trillion.

According to Fabby, PLN's funding ability should be high enough to secure funding.

“PLN needs to further explain whether the issue is that PLN's capital ability is limited or there are other factors,” said Fabby when contacted separately.

Fabby stated that there should be private sector participation in smoothing out PLN's New Renewable Energy (EBT) power plant projects. However, PLN is seen as preferring to seek partnerships with an equity partner scheme, so it tends to want to work on its own and the share for the private sector is relatively small.

“If PLN's ability is limited, the private sector should be encouraged. If this is to be implemented, PLN must create a good investment climate. Starting with timely auctions, power purchase agreements (PPA) designed to provide a reasonable profit rate for developers,” he said.

So Fabby suggested that EBT projects can be worked on by the private sector, while PLN focuses on its responsibility to build transmission.

IESR predicts that in the new RUPTL, the investment needs will be greater than the RUPTL 2021-2030 because the obligation of EBT power plants is increasing and the super grid project must be accelerated.

“If PLN cannot mobilize funding, the funding gap could become even larger,” said Fabby.

Recently, the Executive Vice President of Renewable Energy PT PLN, Zainal Arifin admitted that PLN recorded a steady income in the range of IDR 400 trillion, which is also followed by a large debt nominal.

“But people still trust us because we still have a cash flow asset of IDR 1,600 trillion, so it's still large. If we need funding, our finances are quite healthy,” he said when met at the sidelines of the IMEC 2023 event in Jakarta, on Tuesday (19/12).

However, they are currently facing a significant challenge from the Domestic Content Level (TKDN) policy that hinders foreign funding. Currently, there are IDR 51.5 trillion in PLN projects whose funding is constrained by this policy.

So far, the Ministry of Industry does not want to relax the TKDN rules for foreign financing, even if it is an EBT project.

Zainal hopes for a revision related to TKDN specifically for projects whose funding comes from abroad.