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UPDATE 2-Indonesia's energy minister rejects cost-based coal pricing scheme
September 28, 2017 / 11:38 AM / in 2 months

UPDATE 2-Indonesia's energy minister rejects cost-based coal pricing scheme

(Adds comment from PLN, context)

By Wilda Asmarini and Fergus Jensen

JAKARTA, Sept 28 (Reuters) - Indonesia’s energy minister said on Thursday he disagreed with a proposal from state-owned power utility Perusahaan Listrik Negara (PLN) to fix domestic coal prices, and suggested the utility should become more efficient.

Energy and Mineral Resources Minister Ignasius Jonan told reporters that PLN’s plan to set the price of coal using a formula that takes the cost of mining the coal plus a fixed margin was “outdated.”

A spokesman for PLN did not answer calls or immediately respond to a written request for comment.

Shares of domestic coal miners including PT Adaro Energy and PT Bukit Asam rose in the expectation they would continue to benefit from current high prices rather than submit to a fixed pricing mechanism.

“Costs could be set as they please,” Jonan told reporters at a ministry event, referring to production costs of coal miners.

PLN had made the coal pricing proposal in an effort to reduce its own costs of providing electricity to the island country of more than 200 million people.

Instead, Jonan said the ministry was studying “fairness” and urged PLN to make efficiency improvements to cut costs.

“PLN must also (improve) efficiency in all of its activities, primarily in power station maintenance and transmission and distribution,” he said, asking PLN to review its fuel consumption and consider closing costly diesel fuel-fired power stations.

‘BONA FIDE’

Earlier, Finance Minister Sri Mulyani Indrawati said PLN should scale back its investment plans as its debts and interest on its loans had outgrown its cash-raising capacity.

PLN chief executive Sofyan Basir said the concerns over the company’s financial situation were overblown.

“There is nothing to worry about,” Basir told reporters late on Wednesday. PLN has around 300 trillion rupiah ($22 billion) in debts due over the next 30 years, but is owed more than 12 trillion rupiah in outstanding subsidy payments from the government this year, Basir said.

“PLN is bona fide.”

PLN is earmarked to develop 11.2 gigawatts (GW) of the government’s 35 GW programme, but Basir said the timeline for combined cycle steam and gas power stations PLN is expected to develop could be postponed.

“We have enough now,” he said. “(We) will do it when the economy grows.”

Coal currently contributes around 57 percent of Indonesia’s energy mix, with domestic consumption expected to climb to 101 million tonnes this year from 90.6 million tonnes in 2016.

$1 = 13,510 rupiah Reporting by Wilda Asmarini; Writing by Fransiska Nangoy and Fergus Jensen; Editing by Christian Schmollinger and Mark Potter

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