PLN forms PT PLN Batam

State electricity company PT PLN has formed PT PLN Batam in a bid to better serve the growing number of industrial customers in the Batam Island, Riau, according to PLN corporate secretary Murtaqi Syamsuddin.

With the establishment of the new subsidiary, PLN's working unit in Batam was automatically liquidated.

Murtaqi explained that the transformation of Batam unit into a subsidiary, PT PLN Batam, was expected to solve PLN's problems in meeting the increasing demands of electricity in Batam.

PLN, with its current structure, was still facing difficulties to raise funds for new investment. Consequently, PLN could not build new power generations to meet the increasing demand in Batam.

With the establishment of PLN Batam, it was expected that the subsidiary would be able to move more freely in fund raising and therefore, invest in new power generation. And in the end, the subsidiary would be able to achieve a break-even point and book profits.

Murtaqi noted that when Batam was still served by PLN's working unit, the Batam unit continuously booked deficit. "The operation of PLN"s Batam Unit has so far booked deficits. On the contrary, demands for electricity has been growing at an average rate of 35 percent per annum. And such a strong demand is projected to continuously increase in the coming years."

Based on PLN's 1999 loss-profit report, the Batam unit suffered a net loss of Rp 30.250 billion, a sharp rise from a loss of merely Rp 7.32 million.

According to Murtaqi, the high loss recorded by the Batam unit was caused by the high overhead cost to operate diesel oil-powered generators and the relatively low electricity tariffs.

"In 1999, we sold electricity at RP 270.50 per kilo watt per hour (kWh), while our operation cost averaged Rp 343 per kWh, and thus we suffered a loss of Rp 72.50 per kWh. Therefore, the more we sell electricity, the more we suffer losses," Murtaqi said.

He explained that even new tariffs, implemented in early 2000, still could not cover the Batam Unit's operation cost.

Murtaqi explained that PLN electricity in Batam was a lot cheaper compared with electricity produced by private entities such as the one in Batamindo industrial estate that sold its electricity at S$15 per kWh or Rp 750 per kWh.

He explained that PLN Batam would be free to set its electricity tariffs so that it could book profits.

And to anticipate the growing demand, PLN Batam would continue to invest in new power generation. PLN Batam is currently building new facilities that would expand its production capacity by 42 megawatt (MW), consisting of 30 MW from power generators relocated from Lhokseumawe, 7 MW from renovation and 5 MW from new generation. With the new additional capacity, PLN Batam's total production capacity reached 120 MW. (*)