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Indonesia plans to inject US$2.4bn in PT PLN and US$3bn in Pertamina

19 May 2020

The Indonesian government is planning to provide IRD128,000bn (US$8.6bn) for 12 state-owned companies, including a cash compensation of IRD35,000bn (US$2.4bn) to state-owned electric utility PT Perusahaan Listrik Negara (PT PLN) in 2020 and IRD44,000bn (US$3bn) paid in instalments over 2020-2022 to national oil & gas company Pertamina. The sales of both companies declined in the wake of the ongoing lockdown due to the coronavirus epidemic.

The bailout plan comes in addition to the capital injection program made before the pandemic. In addition, Pertamina will be authorised to unblended diesel fuel to other fuel retailers. If the national oil & gas company can distribute diesel fuel without blending them with palm-based fuel, private retailers are forced to do so. The country has a mandatory use of biodiesel with a minimum 30% fatty acid methyl ester (FAME) made from palm oil content.

In April 2020, Indonesia introduced a US$6/MBtu cap on gas prices for power plants, that applies retroactively from 7 April 2020 to PT PLN and to independent power producers (IPPs). Since then, the difference between market prices and fixed prices is covered by the Indonesian state. The cap on gas prices is expected to cut subsidies that the government pays to PT PLN, for which it has budgeted IDR54,800bn (US$3.8bn) in 2020. PLN’s total fuel expenditures are estimated at IDR146,670bn (US$10.3bn) in 2020, of which 38% for natural gas.

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