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PLN books big profits thanks to government compensation, forex gains

Jakarta Post - September 26, 2019

Norman Harsono, Jakarta – State utility company PLN booked first half net profit of Rp 7.35 trillion (US$521.53 million), greatly turning around a net loss of Rp 5.34 trillion in the same period last year, according to its recently published financial report.

PLN finance director Sarwono Sudarto primarily attributed the turnaround in the January to June period to the large compensation payment from the government and the large amount of foreign exchange gains received by the company during the six-month period.

The company's revenues in the first half rose 4.95 percent year-on-year (yoy) to Rp 133.45 trillion, mainly supported by a 4.41 percent increase in electricity use to 118.52 Terawatt hour (TWh).

"Increased use was also supported by an increase in users that, as of June 2019, reached 73.62 million individuals or an increase of 3.92 million users from June 2018," said Sarwono in a statement.

The higher user numbers, he continued, helped bump up the country's electrification ratio to 98.8 percent in June this year, up from 98.3 percent at the end of last year.

Indonesian Renewable Energy Society (METI) chairman Surya Darma is unsurprised by rising electricity use in this year's first half as it has been consistently rising over the past six years.

"It's not only because of an improving economy but also because of lifestyle changes," he said, "Eventually, people will not want to use gas stoves but use electric stoves. It is normal."

The report also shows PLN received in the first half a whopping Rp 13.15 trillion compensation income from the government. The company did not receive such an income last year.

The income, regulated under the 2003 State-Owned Enterprises (SOEs) Law, compensates PLN for selling power at prices below the electricity supply cost (BPP) for certain demographics.

"The costs that rose significantly were those related to the purchase of electricity from private companies [...] following the operation of several power plants operated by independent power producers [IPP]," said Sarwono, adding that such costs had increased 9.5 percent yoy to Rp 41.4 trilion.

The report also shows PLN's foreign exchange gains hit Rp 5.04 trillion in the first half, turning around from foreign exchange losses of Rp 11.58 trillion in the same period last year.

"Improved PLN profit was also caused by the strengthening of the rupiah against foreign currencies, particularly the US dollar and euro, whereby most of the company's long term loans to finance investments, especially the 35 GW program, is in US dollar," said Sarwono.

He was referring to an ambitious government project launched in 2015 that aims to increase Indonesia's installed electricity capacity by 35,000MW. The government reached 10.7 percent of the target by July.

PLN itself is responsible for constructing 8.8 GW worth of power plants out of the government's total target. The company reached 11 percent of its target by July.

PLN spokesman Dwi Suryo Abdullah told the Post separately that going forward, the company would push revenue growth by raising the number of new customers and per capita electric consumption.

"This growth is of course related to the electrification ratio in the first half that reached 99.21 percent. We hope electrification reaches 99.5 percent by the end of 2019," he said.

In terms of per capita consumption, he noted that PLN held last month a promotional campaign that offered discounts on increasing a house's electrical capacity if the customer owned an electric stove, motorcycle or car.

The company needs to push sales as it will bear billions in reparation costs following last month's blackout. The compensation fees for customers affected by the blackout are estimated at Rp 833.9 billion.

Source: https://www.thejakartapost.com/news/2019/09/26/pln-books-big-profits-thanks-to-government-compensation-forex-gains.html