Norman Harsono, Jakarta – State-owned electricity company PLN's net profit nosedived last year as a result of higher tax expenses and operational costs that had offset its higher income, according to the company's annual report released on Monday.
PLN booked a net profit of Rp 4.32 trillion (US$292.4 million) in 2019, lower than Rp 11.56 trillion in 2018 even though revenue grew 4.67 percent year-on-year (yoy) to Rp 285.6 trillion from improved electricity access in Indonesia. The company also recorded an income of Rp 73.9 trillion from state reimbursements.
"[We] added 3.8 million customers," PLN spokesperson I Made Suprateka said in a statement on Monday, adding that PLN's consumer base now stood at 75.7 million users.
The company's operating costs rose slightly by 2.3 percent yoy to Rp 315.4 trillion in 2019, but tax expenses ballooned 2.6-fold to Rp 21.8 trillion over the same time period.
Company representatives did not respond to questions about its higher tax expenses.
The spokesperson also hinted that the higher sales revenue was notable "under the condition that electricity tariffs did not rise in 2019," suggesting that increases were mainly driven by the wider customer base.
PLN and the government raised Indonesia's electrification ratio – defined as the portion of neighborhoods that can switch on a lightbulb – to a historical high of 98.89 percent in 2019.
As a result, the company's electricity sales reached 245.52 terawatt-hours in 2019, up 4.65 percent from the previous year.
PLN's statement added that the company increased its installed power generation capacity by 8 percent to 62,234 megawatts (MW) and its electric network by 11.5 percent to 59,817 circuit kilometers last year.
However, analysts warn that at least two of PLN's ongoing programs this year presented risks for the electricity company's post-pandemic financial recovery.
The first program is PLN's free and discounted electricity scheme for 31 million of Indonesia's poorest households. The three-month scheme was expected to cost Rp 3.5 trillion but the government recently announced it would be extended by another three months until September.
Government representatives said the state would reimburse PLN but did not mention a timeline. The government still owes PLN Rp 48 trillion for subsidies incurred in 2018 and 2019, said a company executive.
"[The profit recorded in 2019] does not close the possibility of PLN making a loss this year," energy economist Fahmy Radhi of Gadjah Mada University (UGM) said in a statement on Tuesday.
The second program is PLN's Take-Or-Pay policy, in which the company guarantees buying a certain amount of electricity from independently owned coal-fired power plants – even when demand collapses, like what is now happening in the pandemic.
The Institute for Energy Economics and Financial Analysis (IEEFA) estimates in a recent report that payments to such independent power producers (IPP) will become PLN's largest operating expense by 2021, exceeding the company's own spending on fossil fuels.
"The COVID-19 crisis has upended Indonesia's financial settings and PLN's dealings with the Indonesian public and global markets will need to be adjusted to face a new reality," said IEEFA Asia director for energy finance studies Melissa Brown.
Previously, PLN president director Zulkifli Zaini said in April that the company expected this year's 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.
"Each 1 percent fall in electricity demand means PLN's revenue falls Rp 2.8 trillion, as a rule of thumb," Zulkifli told lawmakers via video conference.
He projected the company's revenues to reach Rp 257 trillion this year, 14.7 percent below the initial target of Rp 301 trillion.