Government proposes two indices as reference price of coal for PLN
Saturday, October 14 2017 - 02:22 AM WIB
The Ministry of Energy and Mineral Resources will propose two indices to state-owned electricity firm PT PLN as reference price to determine coal price for domestic power plants.
The proposal comes after the ministry earlier turned down a proposal from PLN to set the coal price based on a formula of production cost plus margin, arguing that such a formula is outdated and would not encourage efficiency. The formula is currently applied only in determining coal price for mine mouth coal-fired power plants, where the margin is negotiated between coal producers and power plant operators, but is limited at between 15-25 percent.
Dadan said that the two proposed indices will be selected from the four indices that are currently used in determining the government?s coal reference price or HBA. The four indices are Indonesia Coal Index, New Castle Global Coal, New Castle Export Index, and Platts59.
He said that the ministry would select two indicates would best serve the interest of PLN.
Dadan said that a new ministerial regulation regarding the price of coal under the domestic market obligation (DMO) policy is expected to be issued this year.
Deputy Executive Director of the Indonesia Coal Mining Association (ICMA) Hendra Sinadia said that the most important thing for the coal industry is that the price formula would help ensure stability of investment in the long-term for the coal miners. (*)