Leaked letter reveals worries over Indonesia’s state power company PLN's debts

Press release - September 29, 2017
Jakarta, 28 September 2017 - Indonesia’s state-owned power company PLN, poses a financial risk to Indonesia’s state budget due to it’s over-ambitious plans to expand dirty coal plants in the Java-Bali region.

These findings come from a  letter leaked from Indonesia’s Finance Minister, Sri Mulyani, which shows the financial condition and risk of default on PLN’s debts. It added that electricity bills needed to rise and production costs would need to fall if the company was to stay afloat.

"PLN has been transfixed by the idea that coal is a source of cheap energy.  But instead, its ambitious coal plans are in danger of leading the whole country into a financial black hole,” said Hindun Mulaika, Greenpeace Indonesia campaigner.

"Sri Mulyani's letter shows how PLN has completely misjudged electricity demand in Java-Bali. PLN thinks it will dramatically increase.  In reality it more likely to decline because of greater energy efficiency.  So PLN’s ludicrous plans for new coal-fired power plants need to be re-thought.  

As recently revealed by IEEFA’s report, "Capacity Payments to Coal-fired Power Plants could lock Indonesia into a High-Cost Electricity Future", the current utilisation rate in Java-Bali is as low as 57.3%, which is barely viable. Yet PLN plans to add another 25,000 MW of coal power will lead to huge over-capacity. The cost to PLN could be US$ 76 billion for unused power generation over the next few years.

“The plants will either be producing electricity for which there is no market, but which PLN will have to pay for. Or they will sit idle, wasting billions of dollars of investment,” said Hindun.

“Someone will have to pay for this and it will either be the state, with a huge impact on budgets for other services like health or education. Or the cost will be passed on to Indonesians in the form of higher electricity prices.”

Greenpeace Indonesia calls on PLN to immediately review coal power plants which are in the pre-construction phase, and cancel those planned in Java-Bali under the 35,000 MW program.

Some coal-fired power plants are currently in the pre-construction stage such as Tanjung Jati B power plant units 5 and 6, CPP Cirebon Expansion and CPP Indramayu 2, and CPP Cilacap. Any increase in electricity demand could and should be met with renewable energies, where costs are declining rapidly making them cost competitive with coal.  

Greenpeace Indonesia also calls on the government to heed the lessons of China, which is facing an overcapacity of 240,00-499,000 MW and the expected loss of US $490 billion by 2020. [2]  In South Africa Eskom and its coal power mega-projects (and other major mistakes) also pushed the company into unmanageable debts. For years Eskom can only stay afloat through pumping huge amounts of money from the national Budget, the country’s pension funds, the South African Development Bank and other state connected financial institutions. All this directly or indirectly deteriorates national finances. [3]

"We do not want Indonesia to be in the same position,” said Hindun Mulaika.  “It is the budget allocation that is clearly wrong, when other sectors such as education and health should be the areas that get support.”


Notes to editors

[1] Overpaid and Underutilized: How Capacity Payments to Coal Fired Power Plants Could Lock Indonesia into a High Cost Electricity Future

[2]  China to spend $493 billion on renewable fuel by 2020

[3] This created a vicious circle of deteriorating financials of largest state-owned company, regular and  significant tariff increases and continuous bailout. This all helped to a fast worsening state financial situation and contributed significantly to the credit downgrading of South Africa to junk this year. Indonesia could learn from this story by revising its bloated electricity plans, stopping coal power plant projects killing PLN financially and opening the market for non-PLN players to be able to finance and build new renewable power capacities.


Media contacts:

Hindun Mulaika, Energy Campaigner, Greenpeace Indonesia, , +62 8118 407 113

Greenpeace International Press Desk, , phone: +31 (0) 20 718 2470 (available 24 hours)