Rising Position | Analysis of Indonesian Electricity Investment Market

Author:田菱电子ENRelease time:2023-03-02 10:41:37

Analysis of Indonesian Electricity Investment Environment

1. Huge market demand

Indonesia's electricity supply is insufficient, and there is a huge gap in electricity demand. According to the 2016-2025 Electricity Plan (Ruptl), Indonesian electricity will maintain a state of huge demand and insufficient supply for the long term. Increasing the construction of power projects has become a key issue that needs to be addressed in Indonesia's economic development.

In the 2016-2025 Ruptl plan, in order to meet Indonesia's average annual economic growth of 6.7%, Indonesia needs to add 80538MW of new installed capacity within 10 years, with an average annual increase of about 8000MW. The total investment required is estimated to be 153.7 billion US dollars, and the required IPP investment exceeds 100 billion US dollars [considering 70% of the new installed capacity to be invested by independent power producers (IPPs) IPPs]. The total market size is quite large.

2. Superior investment environment

Indonesia's Natural economy is rich in resources, the country's politics is stable, the population structure is young, and the middle class is large, domestic demand continues to grow, and the economy will maintain a rapid and positive growth trend for a long time. From the perspective of IPP power project investment practice, Indonesia has successfully implemented a large number of IPP power investment projects. State Power Corporation of China (PLN) has relatively mature experience in the development mode, project implementation, and management and control at all stages of IPP projects. The power purchase agreement (PPA) signed by PLN has been accepted and recognized by Chinese financing institutions and Sinosure.

At the same time, in order to accelerate the implementation of power projects, the Indonesian government has introduced a series of preferential promotion measures in terms of approval procedures, bidding procedures, Eminent domain, project taxes, etc.

1. Low government efficiency

The decision-making mechanism of democratic countries, the game between multiple political parties, the unclear distribution of power between local and central governments, the lack of cooperation among various government departments, and the serious corruption of government institutions have led to low efficiency in government decision-making and execution, and a long decision-making process. Undecision and repeated changes have become the norm in investment projects for many years, greatly testing investors' patience.

2. Difficulties in land acquisition

Private ownership of land has led to difficulties in land acquisition, increasing land prices, and difficulties in dealing with nail households, making project land acquisition a key constraint for many projects to advance. At certain times, the project must have land, and if there is land, the project can be operated.

3. High labor costs

With the continuous increase of foreign investment projects, the influx of foreign labor has attracted great attention from Indonesian society. The restrictions on foreign labor access will become increasingly strict, and labor costs will significantly increase, which will also have a negative impact on the project schedule.

4. Backward supporting facilities

The lagging construction of the power grid and transmission infrastructure has affected power dispatch and consumption, becoming a key factor for investment risk assessment in power investment projects.

5. Intense competition

The Indonesian electricity market has attracted many domestic and foreign IPP investors to enter, and the competition is very fierce. A project often has more than 30 bidders purchasing bids, and the quoted electricity prices have irrational low prices.

Investment prospects for various types of power plants

Indonesia has abundant reserves of coal, natural gas, geothermal and hydraulic resources, with a vast land area and construction facilities