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Fundamental View
AS OF 29 May 2025PLN enjoys extremely strong ties with the Government of Indonesia (GoI) given its critical policy role of electrifying the nation. Post the launch of Indonesia’s sovereign wealth fund Danantara, PLN is now indirectly owned by the GoI through Danantara.
PLN delivered a robust set of FY24 results, with total revenue and EBITDA up 7% and 18% YoY respectively driven by resilient power demand across Indonesia
Looking ahead, we expect PLN’s credit metrics to improve in FY25 supported by higher YoY EBITDA, though partially weighed upon by higher capex; we anticipate FY25 EBITDA growth to be in the mid to high single-digit % YoY, mainly attributable to Indonesia’s healthy economic growth, supporting power demand; we also expect power tariffs to remain flat.
Business Description
AS OF 29 May 2025- PLN is involved in the entire electricity value-chain, from power generation, to transmission, distribution and retail.
- It alone accounts for 76% (~47 GW) of Indonesia's generation capacity (of which 8 GW is renewable capacity), while IPPs provide the remainder.
- The company controls and operates the entire transmission and distribution network in the country. It is the sole buyer of electricity produced by IPPs, through power purchase agreements (PPAs).
- It sells electricity to well-diversified off-takers – 41% to households, 25% to industrial customers, 21% to businesses and 12% to others.
- Since 2015, the GoI has gradually implemented monthly tariff adjustments for 13 customer groups, so that rates charged to customers are better matched with production costs.
- However, under the Public Service Obligation (PSO), the company will continue to sell electricity at subsidized rates of 50% to 450-volt amperes (VA) power households and 25% to 900 VA power households. The GoI subsequently reimburses the company for the difference between the subsidized tariff rate and production cost, typically within 2-3 months.
Risk & Catalysts
AS OF 29 May 2025The company provides subsidized electricity to certain households for which it subsequently receives reimbursements from the GoI; though these payments tend to get delayed during major events such as COVID-19 pandemic.
In order to increase the country’s electrification ratio to 97%, the company had been mandated by the GoI to develop large electricity capacities through the Fast Track II and 35,000 MW Programs. Implementation of such complex programs has required significant capital expenditure, which has led PLN’s FCF to fall deep into the red in recent years and created a funding gap.
The success of the above programs is also contingent on the company’s ability to source coal cheaply, select quality contractors, acquire land rights and receive adequate subsidy reimbursements from the GoI.
Being primarily a thermal power producer, PLN may be viewed unfavourably from an ESG perspective.
Key Metric
AS OF 29 May 2025| IDR bn | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| Debt to Book Cap | 32.2% | 29.7% | 28.9% | 27.8% | 27.3% |
| Net Debt to Book Cap | 28.2% | 26.9% | 25.2% | 23.7% | 23.0% |
| Debt/Total Equity | 47.4% | 42.2% | 40.7% | 38.5% | 37.5% |
| Debt/Total Assets | 28.1% | 25.7% | 24.6% | 23.4% | 22.5% |
| Gross Leverage | 5.5x | 5.0x | 4.2x | 4.3x | 3.7x |
| Net Leverage | 4.8x | 4.6x | 3.7x | 3.7x | 3.1x |
| Interest Coverage | 2.5x | 3.2x | 4.3x | 3.6x | 3.7x |
| EBITDA Margin | 29.0% | 28.0% | 30.1% | 26.4% | 29.1% |
CreditSight View Comment
AS OF 28 May 2025We have a M/P on PLN and prefer its 2042-2050s. While we think PLN’s shorter-dated is trading slightly tighter than our FV, we do not think the widening potential of its shorter dated is sufficient to warrant an Underperform. Overall, we remain comfortable with PLN’s resilient credit profile supported by healthy domestic power demand, good insulation from input cost volatility and strong state-ownership. While there were concerns of the GoI demonopolizing the power sector, we think PLN’s monopoly is likely to stay after President Prabowo reportedly abandoned plans to allow customers to purchase clean electricity directly from renewable energy developers. That said, we think PLN continue to face higher coal-related ESG risk and elevated capex plans that could weigh on its credit metrics.
Recommendation Reviewed: May 28, 2025
Recommendation Changed: December 06, 2024
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