Playing with matches - who should take responsibility for PLN's financial mess?

For PT Perusahaan Listrik Negara (PLN), Indonesia’s state-owned power company, the next few months promise to be a period of high stress, as it seeks to ease the burden of escalating payments to independent power producers (IPPs) and relieve mounting cash flow problems. The COVID-19 pandemic has been the catalyst, but
PLN’s financial crisis has been years in the making due to poor system planning and aggressive fossil fuel baseload capacity additions on fixed terms. The result is a punishing mix of fixed financial obligations for independent power projects (IPPS) that are now delivering capacity on terms that the company cannot afford.

The two key questions now are how PLN will navigate this financial maze and how this will affect the ecosystem of project sponsors, equipment suppliers, financial intermediaries, and funders that have flocked to these deals. All sides are guilty of having ignored the many strategic risks associated with coal power lock-in that the
Government of Indonesia (GoI) is belatedly struggling to address. In addition to Indonesian taxpayers and ratepayers, we see three groups that must be monitored carefully to track PLN’s rescue efforts—the IPPs; the export credit agencies (ECAs) that provided key guarantees to support bank financing and bond issues; and the credit rating agencies (CRAs) that have long taken a permissive view of PLN’s high-risk growth strategy.