PLN Secures Purchase Of Coal Directly From Mine Owners, Before Prices Rise Due To High Demand From China

JAKARTA - PT PLN (Persero) is currently focusing on buying coal directly from mine owners in long-term contracts to anticipate an increase in operating expenses due to rising coal prices.

PLN Executive Vice President Corporate Communications and CSR Agung Murdifi said the policy was taken so that the company consistently maintains electricity supply for the national interest.

"It is important for PLN to work directly with mine owners to ensure the availability of coal supply for PLN's power plants in the long term," he said in a written statement, quoted from Antara, Monday, August 23.

Throughout the last six months, coal commodities have experienced shortages due to various factors ranging from weather, high price disparities in international markets to the impact of the COVID-19 pandemic.

On August 16, 2021, coal touched its highest price of US$163.40 per tonne, which is the highest level with this year's average price of only US$101.83 per ton.

The main factor for the increase in coal prices is the increase in demand from China. Meanwhile, China's coal production has actually declined and China is still setting a policy of banning coal imports from Australia.

The Ministry of Energy and Mineral Resources has set Indonesia's reference coal price (HBA) at US$ 130.99 per ton in August 2021. This level is the highest coal price in Indonesia in the last decade.

The soaring coal price has prompted PLN to take the initiative to secure coal supply, such as preparing digitalization, early warning systems, integrated systems, and intensive cooperation between the company and the Ministry of Energy and Mineral Resources.

In addition, PLN also implements alternative supply through purchasing coal in the spot market, optimizing supply distribution, and improving logistics management including delivery scheduling.

Agung said that direct cooperation with miners has advantages in terms of production certainty and supply volume.

According to the government's advice, he continued, the coal purchase contract was made on a long-term basis with a price that was assessed annually.

"To ensure security of supply, long-term engagement with mine owners who have specifications according to PLN's needs and large reserves are the best option," said Agung.