Biosensores con glucosa oxidasa

How have these various tariff and subsidy regimes affected the financial performance of PLN? In this section, available data from 1990–2015 are used to analyse how these constraints have affected the utility’s long-term financial performance and investment resources.

Before the 1998 Asian Financial Crisis, annual net income from operations was positive with revenues from the sale of electricity constituting the single largest revenue item.63 Expenditures were kept closely below revenues resulting in an average annual net income of 1.3 trillion IDR in 1990–1997 (see Figure 5.1 and Appendix 5.2). This suggests that tariff levels were just adequate to create sufficient revenues to cover costs.

However, Kristov (1995) provided a quantitative assessment of hidden subsidies in PLN’s finances. The paper looked at the yearly income statements of PLN from 1980–1992 and recalculated the accounts by revising interest expenses upwards and including market rates of return to equity. The former corrects for the historically low interest rates that PLN enjoyed because the government absorbed all the exchange risk associated with foreign loans. The latter revision accounts for the fact that a large part of the government’s subsidies takes the shape of state equity, and the inclusion of a competitive rate of return to equity reflects the opportunity costs of the government’s investment. In addition, exchange rate fluctuations were also included. Kristov’s (1995) study found that the average retail price per kWh should have been 46% higher in 1980– 1994 than stated in PLN’s official accounts (Kristov 1995; McCawley 1978).

The Asian Financial Crisis and the drastic devaluation of the Indonesia Rupiah exposed PLN’s vulnerability, because much of its debt were denominated in USD while much of its revenues and operating expenses had to be paid in the domestic currency. Operating and debt servicing costs spiralled out of PLN’s control and were mainly driven by fuel expenditures. The operating ratio (expenses/revenues) increased to above 100 per cent

63 _{Net income is also referred to as earnings before interest and taxes, a common indicator to measure a firm’s}

and the debt service coverage ratio (DSCR) fell below 1 (Appendix 5.5 and Figure 5.4 further below).

Figure 5.1: PLN Income trends (1990–2000)

Source: PLN Financial Statements (various years) (see Appendix 5.2).

From 2001 onwards, PLN revenues have become dependent on the electricity subsidy to varying degrees. Total electricity subsidies increased from 6.7 trillion IDR in 2001 to a peak of 103.3 trillion IDR in 2012 before going down to 56.3 trillion IDR in 2015. The share of the electricity subsidy in total revenues increased from 19 per cent in 2001 to 44.4 per cent in 2012 and decreased to 20.6 per cent in 2015. The peak of the share of subsidy in total revenues occurred in 2008, when it reached 79 trillion IDR or around 48 per cent of total revenues for PLN. In 2005, the government removed the fuel subsidy for PLN, resulting in an increased fuel supply cost for the utility. This resulted in significant increases in the electricity subsidy in 2005 and 2006 (see Appendix 5.3 and Figure 5.3).

Net income has become consistently positive since 2006 and increased significantly since 2009 due to the increase in the subsidy. Total net income fluctuated between small losses and profits until 2006 before turning positive, climbing from 3 trillion IDR in 2007 to almost 30 trillion IDR in 2012. While most of the revenues were driven by electricity sales, the government subsidy has become an increasingly important revenue item. If subsidies were not included, PLN would record steady annual deficits ranging from 3 trillion IDR in 2001 to almost 74 trillion IDR in 2012 and 28 trillion IDR in 2015 (see Figure

5.2 and Appendix 5.2). To keep net income positive, the utility depends to a large extent on the government subsidy, with large-scale investment dependent on borrowing from external sources.

Figure 5.2: PLN income trends (2001–2015)

Source: PLN Financial Statements (various years) and Tables A2 and A3 in Appendix 5.3.

The electricity subsidy is a significant share of the energy subsidy in the central government expenditures, with two noticeable trends in the period 2001–2015, for which realised and audited data are available. Until 2014, total energy subsidies made up, on average, almost 24 per cent of central government expenditures, with fuel subsidies averaging 17 and 6 per cent respectively. After the Jokowi Government made radical cuts to fuel subsidies and phased in higher electricity tariffs in 2014, the share of energy subsidies fell sharply to 11 per cent in 2015, aided by a sharp fall in world oil prices. Revised and projected figures went down to below 5 per cent for both fuel and electricity subsidies. Energy subsidies have been dominated by fuel subsidies, with fluctuating international oil prices periodically affecting the size of the domestic energy subsidy. However, since 2015, fuel and electricity subsidy numbers have almost converged in terms of absolute numbers and relative shares (see Figure 5.3 and Appendix 5.4).

Figure 5.3: Energy subsidies (realised, % of central government expenditures) (2001–

2015)

Note: 2005–2015 audited data; 2016 revised data; 2017–2019 proposed (see Appendix 5.4). Source: Budget (APBN) statistics.

What drives PLN’s expenses? On the expenditure side of PLN’s income statement, fuel and electricity purchases constitute the biggest items. The former constituted an average of 50–60 per cent of total expenditures, while the latter made up around an average of 15–20 per cent of overall expenditure in 2001–2015 (see Appendices 5.2 and 5.3).64

Seen from a financial risk perspective, what can we say about PLN’s debt exposure and capacity to borrow money to invest in the power sector? The balance sheet side shows that PLN went through several trends and phases from 1990–2015 (see Figure 5.4 and Appendices 5.5 and 5.6).

In the early 1990s, PLN showed solid finances with low operating, debt/equity and short- /long-term debt ratios before the 1998 Asian Financial Crisis. From the mid-1990s these

64 _{It must be noted though that PLN made a change to its accounting system in 2011, when it decided to reclassify} ‘purchase of electricity’ not as an expenditure item but as ‘financial lease’ and ‘interest expense’ items. The utility

argues that the change was necessary to reflect the Indonesian Accounting Standards Board’s (Pernyataan Standar

Akuntasi Keuangan) recommendation that certain power contracts between PLN and IPPs contained leases that should be treated as financial leases (PLN 2012a, p. 137, Note 58). As a result, the share of ‘purchase of electricity’

ratios started to rise, together with declining DSCR, peaking with the advent of the Asian Financial Crisis.

Recovering from the crisis, the first half of the 2000s saw PLN’s finances showing relatively high operating ratios, negative and very low rate of returns, and DSCR recovering. Debt to equity ratios fell sharply after the crisis, as PLN managed to settle debt negotiations with external investors.

Finances consolidated between 2005 and 2008, with stable operating ratios and steady increases in the RORs, the self-financing ratio and the DSCR (see Appendices 5.5 and 5.6).

Figure 5.4: Selected financial indicators of PLN (1990–2015)

Source: PLN Annual Statistics (see Appendices 5.5 and 5.6).

However, in the period 2009–2015, most financial indicators worsened until 2012 before recovering slightly. The debt/equity approached pre-crisis levels again, with DCSR and self-financing ratio also declining up until 2012. By 2015, these financial indicators had improved in line with improving net income flows and operating ratios.

A legacy from the Asian Financial Crisis is that PLN is cautious about entering loan and PPA agreements that unfavourably allocate exchange rate risks to the utility (Wells & Ahmed 2007). Short-term loans denominated in USD contributed significantly to the deteriorating financial position of PLN (Purra 2009; Wells & Ahmed 2007). Since the

crisis, PLN has managed to reduce the proportion of short-term loans, but more recent figures for 2014–2015 showed an increase to above pre-crisis levels again (see Figure 5.4). However, PLN still has to bear exchange rate risks, with net exchange rate losses having accumulated to around 65 trillion IDR (US$5 billion at exchange rate of 13,300 IDR/USD) during 2000–2015 (PLN 2016a). In 2013, net losses stood at around 48 trillion IDR (US$4 billion), the highest since 1998 (PLN 2013).

From a global point of view, PLN is considered to be a safe borrower, as perceptions of rating agencies have improved over time. Both Moody and Fitch, for example, rated PLN’s credit performance as stable and positive in the period 2014–2016, more or less in line with the country’s overall sovereign rating. A common theme among the various credit agencies is that while there are concerns about PLN’s financial position due to low net income flows, moves towards reforming the tariff system and government support to subsidise the state utility provide enough grounds to provide secure credit ratings.

From a project-level perspective, allocation of exchange rate risks between PLN and IPPs have a significant bearing on PPA negotiations. It should be noted that the regulations do not specify whether under the PPA BPP costs are USD equivalent based or Rupiah based. In practice, PLN prefers Rupiah-denominated contracts, but many RE projects do depend heavily on imported equipment and prefer USD-based costs (Baker McKenzie 2017).

MEMR MR No. 3/2015 determines the maximum PPA tariff for power projects with the following formula:

P(t) = P(n) *[0.75 + 0.25*(USPPI(t)/USPPI(0)]

For geothermal power projects the formula is slightly different (ADB & World Bank 2015, p. 46):

P(t) = [(1-α)*P(0)] +[αP(0)USPPI(t)/USPPI(0)

where

P(t) = Tariff in year t, in US cents/kWh

P(n) = Base tariff at current time

USPPI(t) = United States Producer Price Index for year (t)

USPPI(0) = United States Producer Price Index at time of tender (0)

α = Coefficient based on ad hoc negotiations, estimated cost attributable to post- commissioning OM.