New Market Research Report: Indonesia Power Report Q1 2013

New Energy market report from Business Monitor International: "Indonesia Power Report Q1 2013"

by Bill Thompson

(WireNews+Co) - Boston, MA - 07 February 2013

BMI View: Our short- and long-term growth forecasts for the Indonesian power sector remain relatively unchanged, as we have not seen any dramatic changes in the business or regulatory environment. Instead, delays in several large geothermal projects have led us to revise down our geothermal forecasts, and we have raised our coal power forecasts to account for new capacity additions and to cover the predicted shortfall. We also believe that electricity prices in Indonesia are set to increase due to the government's ambition of lowering electricity subsidies, and that this could be positive for attracting private investment into the sector.

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We are forecasting electricity generation in Indonesia to grow by 7.7% in 2013. While this figure remains unchanged from our previous forecast, we have changed our growth forecasts for geothermal and coal energy in the country. We revised down our 2013 non-hydropower renewable generation growth forecast from 14.9% to 10.0% because we have received reports that many projects were running behind schedule. In July 2012, Indonesia's state electricity utility Perusahaan Listrik Negara (PLN) revealed that 13 geothermal power projects were stuck in various exploration stages, and were likely to miss development deadlines.

Our long-term forecasts for Indonesia's power sector remain relatively unchanged as well, and we are forecasting generation growth to average 7.3% per annum between 2013 and 2021. We believe that the delays affecting the geothermal projects could stretch over the long term, with coal-based generation covering the predicted supply shortfall. As such, we have revised down our geothermal forecasts and revised up our coal forecasts accordingly.

Key trends and developments in the Indonesian electricity market:

- In September 2012, an Indonesian parliament commission approved a government plan to raise the price of electricity by 15% by the end of 2013. State utility PLN has announced its intention to acquire coal mines, due to the strong historical and forecasted growth in coal consumption. Its subsidiary, PLN Batubara, will perform acquisitions with an expected budget of INR10trn (US$1.05bn) to finance acquisitions of entire mines or strategic stakes.
- The feed-in tariff for geothermal energy was raised in July 2012. As a result, we believe that private producers will be more interested in the sector, but that there is still room for further tariff increases.
- Industry reports suggest that Indonesia holds up to 76 gigawatts of hydropower potential, but the country has yet to embark on the large hydroelectric programmes seen elsewhere in the Asia Pacific region. The capital costs involved have most likely deterred investors who prefer to stick with conventional thermal schemes or embrace geothermal supply.

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