Client Seminar Series 2008: Indonesia Business Law ... · 500 1,000 1,500 2,000 China Other Asia Latin ... UP Perak Grati SPP & CCGT 864.08 MW Jakarta Bandung Surabaya ... PLTU Mulut

COMPANY PRESENTATION

20072008

Powering The Growth of Indonesian EconomyMrs Praktimia Sembiawan


20072008

• Contents :

Electricity SectorsIP – Company in BriefIP – 5 Criteria of Attractive Investment Case

Growth ProspectsDominant Market PositionOperational ExcellenceFinancial SoundnessSizeable Expansion Projects

Summary


20072008

Electricity Demand Growth vs. Average Tariffs (04-09)

8.5 8.47.6 7.3

6.75.9

1.9 1.9 1.6 1.5 1.52.5

21.4

12.41310.510.2

8.310

6.23.9

64.95.8

0

2

4

6

8

10

Indonesia China Thailand India Malaysia Philippines US France UK Hongkong Germany Japan

Elec

tric

ity D

eman

d C

AG

R 0

4-09

(%

)

0

5

10

15

20

25

Ave

rage

Tar

iffs

US

cent

s pe

r kW

h

High Growth in Developing Markets Low Growth in Developed Markets

Source : Economist Intelligence Unit from UBS Presentation

Developing Markets :- Significant demand growth and electricity expansion requirements

- Significant capital requirements- tariffs usually not cost reflective

Developed Markets :- Limited growth and funding requirements- tariffs usually cost reflective

Developing Markets need to focus on system expansion to cater its electricity demand growth

High Growth of Electricity Demand


20072008

Investment Requirements by Region (2001-2030)

1,700

750 625

250

1,690

1,120810

400

1,830

0

500

1,000

1,500

2,000

China OtherAsia

LatinAmerica

Africa M iddleEast

Us/Canda EU OECDPacific

OtherOECD

US$

(bn)

Power Investment Requirements in Developing Countries

0

1000

2000

3000

2001-2010 2011-2020 2021-2030

US$

(bn)

Generation Transmission Distribution

• Developing economies require over US$5 trillion in electricity investments over the next 25 years

• Significant requirement in Power Generation, yet, higher requirement in Transmission and Distribution

• Challenges :– Cost reflective pricing– Regulation certainty

(stable and predictable investment regimes

– Stronger local financial markets

– Enhanced corporate governance

Source : International Energy Agency from UBS Presentation

High Growth of Electricity Demand


20072008

Note: Excludes captive generation and consumptionSource: Economist Intelligence Unit, Energy Information Administration, press search, IP’s Long Term Planning

Electricity Consumption/Capita

Electricity Consumption/Capita, 2004 (MWh/Capita)

SIN KOR MAS CHN VNM INA SRL

Installed Capacity/Capita

Generation Capacity/Capita, 2004(KW/Capita)

JPN TWN MAS CHN SRL VNM INA

Indonesia’s Electricity in Asia


20072008

Source: EIU; PLN statistics; Yearbook of Statistics (Malaysia); Singapore Department of Statistics, IP’s Long Term Planning

Consumption per Capita vs. GDP per Capita, 2004MWh/Capita

US$/Capita

India

Pakistan

Vietnam

Power Demand Has Yet to Take Off


20072008

Source: RUPTL 2006-2015

Electricity Demand Growth in Indonesia2006 2007 2008 2009 2010

Demand Growth (%)Indonesia 3.10 7.75 7.88 8.08 8.13Jawa-Bali 1.93 7.00 7.00 7.00 7.00Outer Islands 7.83 10.64 11.13 11.95 11.97

GDP Growth (%)Indonesia 5.9 6.4 7 7.6 7.1Jawa-Bali 5.6 6.1 6.7 7.3 6.2Outer Islands 6.4 6.9 7.5 8.1 8.1

Electrification Ratio (%)Indonesia 60.1 61.6 63.3 65.4 67.2Jawa-Bali 64.3 65.7 67.5 69.5 71.2Outer Islands 53 54.4 56.3 58.4 60.4

Demand growth of electricity is relatively high especially in the outer islands, considering the growth of GDP. However, rate of electrification has not yet 100% fulfilled in 2010. This reflects the needs to aggressively speed up the electricity infrastructure projects, including power generation


20072008

Source: P3B, July 2007

Key Issues (1)

Electricity demand (projected based on GDP Multiplier), grow in higher rate than available capacity. If there is no adding capacity, then reserve will be decreased significantly.


20072008

Key Issues (2)

• The on-going increase on crude oil price leads to an even higher electricity price in Indonesia, which ~34% were generated by oil-fired power plant. This leads to an urgent need to either convert the existing power plant to use other source of primary energy, or to built new plants which utilize renewable energy

• The government of Indonesia embrace the involvement of private sector in fulfilling the needs of electricity in years to come

• By 2020, it is hoped that 51% of electricity generated will be produced from coal-fired power plant, while nuclear power is also being considered *)

*)Source: The Report on Emerging Indonesia 2007


20072008

Market Structure (Jawa-Bali)

Generation

Distributor

End User

PLN’s Distribution Company

PLN’s Jawa – Bali Dispatcher

End customerIndustrial, Commercial & Households

Industrial and CommercialCaptive power

PJB IPPSmall Scale

PlantsPrivate & Captive

PowerGeneration

Distributor

End User

PLN’s Distribution Company

PLN’s Jawa – Bali Dispatcher

End customerIndustrial, Commercial & Households

Industrial and CommercialCaptive power

PJB IPPSmall Scale

PlantsPrivate & Captive

Power


20072008

Company Structure


20072008

1992 1995 2000 2007

Power plant company with the biggest dependable capacity in Indonesia.

PJB I was changed to PT Indonesia Power

PLN established 2 subsidiaries: PT PLN Pembangkit Tenaga ListrikJawa-Bali I (PJB I) & PT PLN Pembangkit TenagaListrik Jawa-Bali II

(PJB II)

Deregulation in electric power sector in using of private sources through development of private power plant.

Company History

Focused on power generation, with a total installed capacity of 9,050 MW (Estimated 2007)

•127 units with a total installed capacity of 8,988MW and ~50% dispatch share onthe Jawa-Bali system, the country’s largest and most important

•Several units with a combined capacity of 62MW in the outer islands


20072008

To be a public companywith a world class performance and

caring towards the environmentVISION

To engage in the business of power-utility and pursue related businesses in accordance with

sound business principles towards achieving sustainable long-term growth

MISSION

Vision and Mission Statement


20072008

IP’s Power Plants Location in Jawa-Bali

UP Perak Grati

SPP & CCGT

864.08 MW

Jakarta

Bandung

Surabaya

Semarang

Grati

Banjarnegara

Installed Capacity 8,992 MW

UP Kamojang

Geothermal

375 MW

UP Mrica

Hydro

306.44 MW

UP SagulingHydro

797.96 MW

UP Bali

GT & Diesel

432.67 MW

UP Suralaya

Steam Coal PP

3,400 MW

UP Priok

GT, CCGT & Diesel PP

1,348.08 MW

UP Semarang

CCGT & SPP

1,469.16 MW

UP Perak Grati

SPP & CCGT

864.08 MW

Jakarta

Bandung

Surabaya

Semarang

Grati

Banjarnegara

Installed Capacity 8,988 MW

UP Kamojang

Geothermal

375 MW

UP Mrica

Hydro

306.44 MW

UP SagulingHydro

797.96 MW

UP Bali

GT & Diesel

427.59 MW

UP Suralaya

Steam Coal PP

3,400 MW

UP Priok

GT, CCGT & Diesel PP

1,348.08 MW

UP Semarang

CCGT & SPP

1,469.16 MW


20072008

Indonesia Power Capacity

IP dominates Jawa-Bali installed capacityWith generating capacity of 8,988MW in Jawa-Bali, IP manages the largest dependable capacity in Indonesia, and hold the greatest capacity share within the system. In FY’07 production reached ~44% of Jawa-Bali total production


20072008

5 Criterias of Attractive Investment Case

11

22

3344

55

Attractive Growth Prospects

DominantMarket Position

OperationalExcellence

FinancialSoundness

Sizeable ExpansionProjects


20072008

2006-2010

~11.4% cagr

~7.0% cagr

Attractive Growth Prospects1

Source: PLN, Economist Intelligence Unit, IP analyst

Demand growth in Outer Island is expected to outpace Jawa-BaliWith growth demand expected to reach ~11% cagr over the next 5 years, capturing selective projects may reduce asset portfolio risks and seize higher profitability


20072008

Dominant Market Position2

Biggest Installed Capacity in SEA• IP’s is by far the largest

IPP in SEA and #4 among listed IPP in Asia

• IPPs in Asia which currently oversize IP are:

– NTPC : 24,592 MW– Huaneng : 19,852 MW– Datang : 9,567 MW


20072008

Operational Excellence3.1

EAF (%) EAF (%)

90.8% 90.0%88.8%

78.0%83.5% 84.6% 85.0%

93.3% 94.8%

83.5%

Hydro Power Plants(1)Thermal Power Plants

Indonesia Power

100%

80%

60%

40%

20%

0%

80%

60%

40%

20%

0%SteamCoal

SteamOil

Combined Cycle

Gas Turbine

TNB(2) Beijing Datang(Steam Coal)

Malakoff(CCGT)

WorldAverage

TNBIP

(1) Difference in Capacity Factor (CF) not considered in this analysis(2) As of 2003/2004Source: TNB Analyst Briefing; Beijing Datang and Malakoff Annual Reports; World Energy Council Report on Performance of Generating Plant (2001), IP report


20072008

Financial Soundness4

• Stable asset base

• Low debt level

• No potential debt overhang problem

Balance Sheet 2004-2007(Rp tn)

Assets Liabilities Equity

52.9 43.5 58.9 47.2 56.2 44.9

8.311.7 11.3

2004 2005 2006 2007

45.066.1

21.1


20072008

Financial Soundness4.2

2002-2006 Comparable Earnings (Rp Tn)

• Steady growth in key earnings figures – Revenue, EBITDA and Net Profit

• However, EBITDA Margin was decreasing in 2006, contributed by the increasing fuel cost

32.2% 27.3%30.3% 20.0%EBITDAMargin


20072008

Sizeable Expansion Projects5.1

High-Level Strategies Lever

Maximize Price Realization Price

Reduce Operating Costs

Improve Asset Utilization

Staff

Materials

Maintenance

Availability

Utilization Rates

Fuel Mix

Profitability Improvement

Efficiency

Planning and Volatility

Asset Base

Reduction of Cost of Capital

Growth

Manage Overall Company Risk

Grow Within Today’s Core Market

Expand into New Markets/ Businesses

Regulatory & Stakeholder Management

Thermal Efficiency Monitoring

Optimal Corporate Finance

Manpower Planning

Procurement & Inventory Management

Maintenance Excellence

HR Systems & Management

IT Systems

Trading and Direct Selling Capabilities

Strategic Initiatives

Portfolio Development

Value Creation

High Level Strategies


20072008


Roadmap on Portfolio Development

RegionsPrograms

PortfolioDevelopment

ExpandingInstalled Capacity

Fuel Mix Gasification

Up-rating andRehabilitation

Jawa-Bali

Outer Island

StrategicInitiatives

Relocation


20072008


Roadmap on Portfolio Development


20072008

Prospective Projects in Jawa-Bali*)


*) Subject to reconfirmation

Power Plant Location Capacity Project Cost Year oftype (MW) Est (US$ Mn) Operation

PLTGU Priok, West Java 720 582.2 2010PLTA Rajamandala, West Java 47 73.54 2010PLTM West Java & Central Java 4 5.6 2008 - 2009PLTU Suralaya, West Java 600 600 2010PLTU Labuan, West Java 600 600 2010PLTU Teluk Naga, West Java 945 900 2010PLTU Jabar Utara, West Java 900 900 2010PLTU Jabar Selatan, West Java 1050 900 2010

Additional Capacity 4,866


20072008

Power Generation Location Capacity Project Cost Year ofType (MW) Est (US$ Mn) Operatoin

PLTU Kupang, East Nusa Tenggara 30 33 2010PLTU Tarahan, South Sumatera 270 294.6 2010PLTU Mulut Tambang, East Kalimantan 50 68.7 2010PLTU Mulut Tambang, South Kalimantan 130 131.9 2010PLTU Nunukan, East Kalimantan 12 12.8 2009PLTU Palu, South East Sulawesi 20 19.4 2009

Additional Capacity 512

Prospective Projects in Outer Island**)


**) Subject to reconfirmation


20072008


Successful project expansions will increase IP’s generating capacity up to 14,000 MW in 2012

MW


20072008

Capacity vs Sales to 2012

With its added capacity (up to ~14 GW), IP sales will grow to 7.44% cagr. for the next 5 years



20072008

• Summary

Electricity demand is projected to grow at average of ~8.0%* forthe next three years, or even higher, given the low ratio of electrification and high projected GDP growth

Indonesia Power (IP) is in a good position to benefit this demand growth, as it has the largest installed capacity in Indonesia, with steady expansionary program, which backed by a robust balance sheet. IP also has a long track of operation and maintenance experience for a wide range of power plant type

Indonesia Power is looking to maintain its dominant role in the future, as a socially and environmentally conscious company that contribute to the national economy

*: Source : RUPTL 2006-2015


20072008

Thank You


20072008

Disclaimer : This report (including any information contained herein and any information, whether or whether not in writing, supplied in connection herewith) is strictly confidential.

This report has been prepared by PT Indonesia Power (the “Company”) and is furnished to you solely for your information and may not be reproduced or redistributed, in whole or part, to any other person.

This report contains certain forward-looking statements, including assumptions, opinions and views of the Company or cited from third party sources. Various known and unknown risks, uncertainties and other factors

could cause the actual results, financial position, development or performance of the company to differ materially from the estimations expressed of implied herein. The Company does not guarantee that the assumptions

underlying such forward-looking statements are free of errors, nor does it accept any responsibility for the future accuracy of the opinions expressed in this presentation or the actual occurrence of the forecasted developments.

By accepting this report you acknowledge that you will be solely responsible for your own assessment of the market and the market position of the Company and that you will conduct your own analysis and be solely

responsible for forming your own view of the potential future performance of the Company’s business.


20072008

• IP’s key business challenges

Source of energy may come at a cost, given that most of the energy sources are located outside Jawa,

Competition may become more intense, particularly when all of infrastructure projects come on stream.

Environmental issues may delay IP’s future investments, as environmental study is needed prior to the construction

Current power plant technology has better efficiency and reliability than the technology of 80-90s which applied to most of IP’s power plants


20072008

Electricity Tariff Structure

Power Purchase Agreement

Depreciation + interest + margin

OverheadCost

PrimaryEnergy

Minority production cost (lubricant, chemical)

D Component: [Rp./kWh]Lubricant, Water, Chemical

C Component: [Rp./kWh]Heat Rate, Calor, Fuel Cost

B Component: [Rp./kW-mo]DMN, O&M, Personnel, Admin

A Component [Rp./kW-mo]:DMN, Debt, Interest

Capacity Charge

Revenue

DMN, EAFreal

Energy Charge Energy Sales

Power Purchase Agreement

Depreciation + interest + margin

OverheadCost

PrimaryEnergy

Minority production cost (lubricant, chemical)









Capacity Charge

Revenue

DMN, EAFreal

Energy Charge Energy Sales


20072008

IP’s Capacity Breakdown by Fuel type

Diverse primary energies1327of IP’s generators in Jawa-Bali using diverse primary energies, such as coal, water, geothermal. 38% of the plants uses coal, which lowering fuel costs

Gas Turbine 0%Gas Turbine

(Oil)9%Geothermal

4%

Combined Cycle (Oil)17%

Combined Cycle (Gas)13%

Steam (Oil)6%

Steam (Coal)38%

Hydro12%

Diesel1%


20072008

Dominant Market Position2.1

Although decreasing, IP still dominates Jawa-Bali Energy MarketWith new non-IP generation plants built and operates, IP’s share in market is decreasing. But, considering the high demand, build new generation plants will keep IP in good position


20072008

• IP’s Employee build strong norms and beliefs of :

IntegrityProfessionalismHarmonyService ExcellenceCareLearnerInnovative

Corporate Culture


20072008

Kapasitas (MW)

Permintaan (MW)Cadangan (%)

Tanpa Crash ProgramTanpa Crash Program

5,000

15,000

25,000

35,000

45,000

55,000

2004 2005 2006 2007 2008 2009 2010

MW

20.00

25.00

30.00

35.00

40.00

45.00

50.00

%

99.1 107.1 116.1 127.6 138.3 150.4 165.0Demand (TWh)

Electricity demand (projected based on GDP Multiplier), grow in higher rate than available capacity. If the crash program to add capacity will not be performed, then reserve will be decreased significantly.

8% cagr

6.2% cagr

Attractive Growth Prospects1.1

Source: PLN, Economist Intelligence Unit, IP analyst

Capacity (MW)

Reserve (%)Demand (MW)

Without Crash ProgramWithout Crash Program


20072008

With its added capacity (up to ~14 GW), IP sales will grow to 7.44% cagr. for the next 5 years


Revenue Growth and Returns

Documents

Client Seminar Series 2008: Indonesia Business Law ... · 500 1,000 1,500 2,000 China Other Asia Latin ... UP Perak Grati SPP & CCGT 864.08 MW Jakarta Bandung Surabaya ... PLTU Mulut