PLN to turn more to gas, coal next year

Ika Krismantari, The Jakarta Post, Jakarta

State-owned electricity firm PT PLN plans to cut the 2008 consumption of oil-based fuels by its power plants by 22 percent to seven million kiloliters (kl), down from this year's estimate of 9 million kl, as part of its efforts to switch to gas and coal.

President commissioner Alhilal Hamdi told The Jakarta Post recently that the firm hoped to cut its oil consumption as a number of new coal and gas-fired power plants came on line from the start of next year.

This year alone, the company has targeted to cut its fuel costs by Rp 9 trillion (US$957 million) to Rp 42 trillion from last year's Rp 51 trillion with the opening of three new coal and gas-fired power plants.

"We will also cut fuel expenditure by starting to switch to marine fuel oil, which is cheaper to replace than the high speed diesel (HSD) we used to use," PLN president director Eddie Widiono said.

Currently, 24 percent of PLN's power plants are fired by oil-based fuels.

The switch to other alternative fuels is expected to boost the company's profits this year.

PLN has been in the red for the past eight years.

"That's why we have partially switched from oil to coal, which is much cheaper," Alhilal said, adding that PLN's coal purchases would increase to Rp 8 trillion this year from Rp 6.4 trillion last year.

If the trend continues, lower production costs mean PLN is expected to post a Rp 3.8 trillion (US$422 million) net profit this year, Alhilal said.

The company's losses dropped by 58 percent in the fist six months of this year to Rp 967 billion (US$100 million) in the first half of this year, down from Rp 2.26 trillion in the same period last year.

The operation of new coal-fired power plants helped PLN to considerably reduce its losses to Rp 1.08 trillion in 2006, down from Rp 4.92 trillion in 2005.

Under the so-called "crash program", PLN plans to build a number of coal-fired power plants to provide an additional power supply of 10,000 megawatts by the end of 2009.

The operation of more coal-fired power plants is expected to further cut the company's operation costs in coming years.