Indonesia Power(less) IPO

PT Indonesia Power, a subsidiary of the ailing state-owned electricity monopoly PT Perusahaan Listrik Negara (PLN), will launch its initial public offering (IPO) in the first half 2006. While the amount of shares to be floated yet to be decided, the company needs at least Rp6 trillion (US$600 million) to develop its power generating capacity to cope with increasing domestic demand for electricity which is estimated to grow 7%-9% per year.

Indonesia Power currently has 9,000 MW capacity and needs additional capacity 630 MW per year. With investment cost of US$100 million per 100 MW and capital expenditure available at US$25 million, the company is powerless.

The company serves the lucrative Java and Bali market and has a 50 per cent market share. Fortunately that most of its power plants are combined-cycle, gas-fired, and coal-fired which normally have lower production costs than diesel-fired power plants.

Abimanyu Suyoso, president director of Indonesia Power, said the company has equity of Rp44 trillion. IPO would sell around 10% of the equity which could reach Rp4.2 trillion. Loans are expected to fill the financing gap as its debt to ratio is 20%.

Roadshow to attract investors has been conducted in various cities such as Singapore, Los Angeles, Boston, and New York.

What about a possible joint venture with private investors? Nope, Abimanyu said. IP needs IPO as the gate to financial market to change the company's financial structure to, let say, 80% loans and 20% equity.

Unlike its parent company, IP booked net profit in the last four years. In 2003, IP booked net profit of Rp1.21 trillion (around US$130 million). PLN booked net loss of US$450 million in the first half 2005.

READ MORE!!!