PLN considers cost plus margin price scheme for coal in power plant projects

By Adianto P. Simamora

While welcoming the use of cost plus margin scheme to determine the price of coal dedicated for mine mouth power plant, state electricity company PT PLN is still discussing the possibility of implementing of the same formula on coal-fired power plant projects as proposed by the Indonesian Coal Mining Association (ICMA).

?We are still discussing it,? PLN?s head of coal division, Harlen said in response to questions from coal conference participants in Bali.

?We support the government regulation including on cost plus margin scheme of coal for mine mouth power plant. We thank the government as the margin has decreased to 15 percent. But in regard to the proposal (of the same formula) to the coal-fired power plant, we still need to sit together to discuss it. We need to know what the coal price then (if using the formula in coal-fired power plant).?

The Ministry of Energy and Mineral Resources has recently issued a new policy on price scheme of coal for mine mouth power plant with margin cost set between 15 percent and 25 percent, down from the previous 25 percent.

ICMA, with members producing over 80 percent of the country?s annual coal production, has repeatedly called on the government to apply a special pricing scheme of production cost plus margin for coal used in coal-fired power plant project to help ensure the sustainability of long-term supply.

ICMA study previously found the current drop in coal price has discouraged many miners from carrying out exploration activities to find new reserves, putting at risk future supply of coal for domestic power plants.

Editing by Reiner Simanjuntak