PLN profit nosedives 63 percent as costs soar
21 May, 2020
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, in line with the company's twelve-monthly report released on Monday.
PLN booked a net profit of Rp 4.32 trillion (US$292.4 million) in 2019, less than Rp 11.56 trillion in 2018 even though earnings 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 react to questions about its higher tax expenses.
The spokesperson also hinted that the higher sales earnings was notable “under the condition that electricity tariffs didn't rise in 2019,” suggesting that increases were mainly driven by the wider customer base.
PLN and the federal government raised Indonesia’s electrification ratio - defined as the part of neighborhoods that can activate a lightbulb - to a historical most 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 prior year.
PLN’s statement added that the business increased its installed power generation capacity by 8 percent to 62,234 megawatts (MW) and its own electric network by 11.5 percent to 59,817 circuit kilometers this past year.
However, analysts warn that at least two of PLN’s ongoing programs this season 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 likely to cost Rp 3.5 trillion but the government recently announced it could be extended by another three months until September.
Government representatives said the state would reimburse PLN but didn't mention a timeline. The federal government still owes PLN Rp 48 trillion for subsidies incurred in 2018 and 2019, said a company executive.
“[The profit recorded in 2019] will not close the opportunity of PLN making a loss this season,” 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 some amount of electricity from independently owned coal-fired power plants - even though demand collapses, like what's now happening in the pandemic.
The Institute for Energy Economics and Financial Analysis (IEEFA) estimates in a recently available report that payments to such independent power producers (IPP) will become PLN’s most significant 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 handle a new reality,” said IEEFA Asia director for energy finance studies Melissa Brown.
Previously, PLN president director Zulkifli Zaini said in April that the business expected this year's demand to decline by 9.7 percent from the original target, as emergency measures imposed by the federal government to prevent the spread of COVID-19 had paralyzed many business activities.
“Each 1 percent fall in electricity demand means PLN’s income falls Rp 2.8 trillion, generally of thumb,” Zulkifli told lawmakers via video conference.
He projected the business's revenues to reach Rp 257 trillion this year, 14.7 percent below the original target of Rp 301 trillion.
Source: www.thejakartapost.com