Nur Pamudji, President Director, Perusahaan Listrik Negara (PLN): Interview

Interview: Nur Pamudji

To what extent does Indonesia’s generation capacity match demand? How does PLN plan to expand access to electricity across Indonesia?

NUR PAMUDJI: Indonesia has sufficient power supply to meet its demands, including a surplus in Java. In fact, we already have excess capacity of more than 30% in Java and have decided to build two 1000-MW units there. As for additional power projects, PLN is facing some challenges related to land acquisition, but I am confident that we will be able to overcome these and build the necessary infrastructure. In the rest of Indonesia, distribution is more difficult because the electrical grid remains weak. For example, South Sulawesi has a capacity of less than 1000 MW, North Sumatra has only 1600 MW and South Sumatra has less than 1500 MW. The grid in these areas needs to be ramped up. Other than the construction of new power plants, there will also be an interconnection from Sarawak, Malaysia, into West Kalimantan province. Sarawak is due to sell its surplus hydropower to Indonesia from mid-2015, providing sufficient power to West Kalimantan. As a result, Indonesia will not have any capacity challenges.

Currently, 50% of Indonesia’s electrical power comes from coal; what plans are there to diversify this energy mix in the medium term?

PAMUDJI: Two years ago coal represented just 38% of the mix, and now it has increased to approximately 50%. Soon this figure will increase to around 65%, which I believe will be too much. Of course, if we can obtain additional gas it will be more economical to build gas-fired plants – but this is not a feasible option in the medium term. Our greatest challenge is boosting renewables. We have the largest geothermal potential in the world but at the present moment we only have 1300 MW in production. We have a 6000-MW geothermal project under development, but it is possible that only half of it will be actualised; the rest will be delayed due to limited concession capabilities.

How much appetite has there been from domestic financial institutions to fund PLN’s expansion and what role do you see international capital playing financing these projects in the future?

PAMUDJI: Compared to Indonesia’s strong demand, I believe local sources of funding remain limited. In 2012, we sold $1bn worth of bonds; two years ago, we sold the same amount. That amount of money cannot be absorbed locally : if it were, the country’s entire resources would go to PLN.

To avoid this outcome, PLN is aiming to source financing from outside of Indonesia, for example in Hong Kong, Singapore, Europe and the US. Of course, we are aware of the risks of borrowing in foreign currency, given the volatility of the exchange rate with the rupiah. Accordingly, instead of bonds, we are now looking to raise funds from banks, as it is cheaper and we believe it is a viable option.

What measures are being taken to increase local partnership in PLN’s operations?

PAMUDJI: PLN wants to purchase electrical equipment from local companies, so we encourage firms to build manufacturing facilities here in Indonesia. PLN can work with companies to facilitate their entry into the market. For example, if a new company decides to build switchgear equipment, such as circuit breakers, they can ask us to guarantee that PLN will purchase this product. The company is a pioneer investor in this segment, so we can guarantee that up to 49% of the equipment required by PLN will be purchased from their factory for the next five years.

PLN has given this guarantee to allow the firm to build its manufacturing facilities in Indonesia, as we want to build a close relationship with the suppliers of our equipment. These links will also optimise PLN’s operations by reducing the stock in our warehouse.