Directives of President of the Republic of Indonesia during the Meeting with Board of Commissioners and Board of Directors of PT Pertamina and PT PLN, 16 November 2021, at Bogor Presidential Palace, West Java Province
Assalamu’alaikum warahmatullahi wabarakatuh,
May peace be upon us all,
Distinguished Ministers of the Indonesia Onward Cabinet, also joining me Minister of State-Owned Enterprises, Minister of State Secretary, and Minister of Investment;
Distinguished President Directors, Directors, and Commissioners of PT PLN and PT Pertamina.
First and foremost, I invite all of you this afternoon in order to show you that the global is changing drastically which it will be your concern in the future to navigate this great ship to the right place. Secondly, I would like to evaluate your duties. And thirdly, I would like to discuss about investment. Those three points will be delivered this afternoon.
We all know that the topic discussed at the G20, as well as the discussion at the COP26 in Glasgow is getting more serious to discuss and the goal of the discussion can be guessed that one day fossil energy, the use of fossil minerals, at some point, will be stopped. Even though, the use of coal by PT PLN is still high and the business of PT Pertamina focuses on oil and gas that inevitably will also be affected if in the future everything leads to electric cars that will start soon in the Europe and other countries. In the form of legislation and regulation, now it has begun. It means that it is not because of B2B (Business to Business) or bilateral cooperation, but they are going to have that. Thus, all of us have to be really prepared.
We all know that the energy transition can not be held up. Therefore, the masterplan, grand design must start to be prepared. What we will do next year, in the next two year, and in the next five years, for example in the next ten years it will be stopped. The plan must be concrete, clear, and in detail, not a macro plan. Both PT Pertamina and PT PLN must have it. The time we have must be spent wisely to strengthen the basis towards energy transition. It aims to achieve a better future, for the interest of our children and grandchildren [state, nation, people]. Therefore, the transition towards green energy is a must and cannot be negotiated anymore. It is your responsibility to find which one the cheapest technology is. This is a competition. The one who can take the role faster will get more benefits.
Based on the data I have, from the total of national energy supply, 67 percent of it is mainly based on coal, 15 percent based on fossil fuel, and 8 percent based on gas. If we can carry out transition to other energy sources, for the example petrol cars replaced by electric cars, use of gas in household replaced by electricity, PT PLN will be over supply. It means that the supply from PT PLN will be absorbed and the number of oil imports by PT Pertamina will decrease. The main goal is our state will earn profits on national balance of payments which it is not solved yet for decades because the number of oil imports is very high. It also affects the Indonesian currency Rupiah to US Dollar because PT Pertamina has to provide, buy huge amount of US Dollar in the market every month.
To that end, the Government encourages electricity use for cars, stoves even there is still problems. It is your duties to prepare the steps, which step must be carried out immediately, in the next year or in the next two years. It will affect the state. If it is not solved, the problem in national balance of payments will not be solved. We have to know the calculations. It is not just because PT PLN and PT Pertamina are state-owned companies. All of you are still within the scope of businesses owned by the state. It means that there is state’s interest, while the professionalism must be implemented to get good EBITDA (Earnings before Interest, Taxes, Depreciation, Amortization), good income. Once again, there is still state duties both in PT Pertamina and PT PLN.
For PT PLN, it must be transparent how the energy transition can be carried out immediately. There must be a target, for the example, in 2022, which is only one more month, 5,000 Megawatt generated by coal must be generated by hydropower or geothermal or solar panel. The steps must be prepared. Meanwhile there is a gap that the one is cheap and the other one is more expensive. How can we solve the gap? The gap has potential investments. The Government has talked to Prime Minister of the UK Boris Johnson and President of the US Joe Biden about this issue. The Government have talked to them that developed countries must take an action and [asked them] who will be responsible to solve the gap? It is impossible to solve by developing countries. From the previous meeting, they seem to be willing and promise that they will disburse USD100 billion every year for the whole world. Every year. The Government has said to them that do not just estimate the number, but the assistance does not exist. This is what we need to start preparing. Which energy source can be shifted to hydropower, which one shifted to geothermal, which one shifted to solar panel, which one shifted to wind power, everything must start to be identified and be calculated. If not, we will be pressured by statements like “Do not invest in Indonesia because it still uses fossil energy” or “Do not give assistance to Indonesia because it still uses fossil energy”. We have to anticipate it.
Moreover, in the field of investment. I noticed that there a lot of investors who want to invest in PT Pertamina and PT PLN. However, there are still obstacles in our bureaucracy and in the companies themselves. Sometimes I am getting mad at something I know but it is really hard to do. Something easy but it’s difficult to carry out and it’s stagnant. You must solve these problems with your professionalism.
The consequence of each duty must be calculated. For example, for PT PLN, how high is the tariff they apply. For Pertamina, what kind of policy issued for Premium gasoline and LPG (Liquefied petroleum gas). All must be reported transparently with detail numbers and calculation. Be logic. Do not think that it will not be checked, controlled. Later, if the assets will be securitized, all of us can know whether the price is too expensive or not, whether the price is possible to be securitized or not.
What caused this? That is just because of the duty then you are negligent. We must avoid this. If the price is too high, I will take action.
It means, PT PLN, PT Pertamina must maintain the management of each duty. Once again, do not be negligent, do not hide behind the name of the duty, so that the management becomes inefficient and the procurement will not be well maintained. We have to avoid this. This is the weakness of the state-owned enterprises so that their professionalism drop.
In addition to the investment, investment decisions may be made by the companies, but the Government also has a big strategy to bring this state to a goal that we aspire together. Once again, the state has a big strategy. Thus, it is important that professionalism, interest of the state and company must go hand in hand. So, the report of the risks, consequences, calculations, numbers from all of you will support the Government’s master plan that we want to build. I have said to all of you. If there is a plan and we have agreed on it, please, do not waste the time.
The change happens every day, every week. We have to adapt rapidly. So, if there is a big plan, the plan can be changed every time as the world, technology change. And the investment opportunities in PT Pertamina and PT PLN are widely open if all of you are open to the investment. The openness to investment is what I want and it is also what we want through the Law on Job Creation.
Let me give you an example; PT Pertamina. It is been years that the Rosneft wants to invest in Tuban, East Java province. I know that the investment has started. The Rosneft wants to work fast, but we are not fast. The investment is amounting to Rp168 trillion, but the realization still reached approximately Rp5.8 trillion. The last time I heard that the company (PT Pertamina) asked the Government to facilitate railways, toll road. The realization just reached Rp5 trillion, it is still under 5 percent. It is not a problem if you ask, indeed the Government must build such facilities. Really, it is not a problem. Just let us know about that. But, the problem is not about that, the problem is the comfort zone. We have to escape from the comfort zone. We cannot work in our comfort zone. No more comfort zone.
Not far from it, there is the TPPI (Trans Pacific Petrochemical Indotama). The investment is amounting to USD3.8 billion. It has been years the project was stagnant because of some problems. After Presidential Inauguration in 2014, I inspected the TPPI. I knew that if the project were success, it would solve a lot of things. Import substitution goods are manufactured there. There a lot of derivative goods from petrochemical goods.
When the last time I inspected, I was mad of Mrs. President Director (of PT Pertamina) because I got the same report like the reports from the previous directors. I told her that I do not want to hear the same reports that I have heard from the previous directors. I told her firmly. We understand all of the two cases. The Government want our current balance is good, our trade balance is good, and the number of imports is low because we can manufacture by ourselves, we have our own industries, we have our own machines, we have raw materials. But, in reality, we do not do that yet. We import it. It makes me sad.
If the project is success, we do not have to import anymore. No more import in the field of petrochemical goods and its derivative goods. I have inspected the TPPI, and that is right that there is a lot of derivative goods that we can produce. A lot of stuffs, but we do not work fast. If I were [the President Director], I would work 24 hours a day to start working. PT Pertamina will earn profits from the company, the State will get profits from the import substitution goods, so our trade balance and current balance will improve. If it succeeds, our currency will strengthen. If we can solve this problem, we do not have to provide US Dollar to buy those imported goods.
In addition to LPG, I have a report about the calculation of DME (Dimethyl ether). Gas reached USD800. DME based on investors‘ calculation reached approximately USD640, based on PT Pertamina it reached USD680. It is okay, all of you can negotiate it. Please, solve it so that we do not have to import LPG. It means that it will affect to our balance.
In addition to PT PLN, it is about energy transition towards renewable energy. We are asked by the world considering Indonesia has a great power [in renewable energy sector]. Our geothermal can generate 24,000 Megawatt, Indonesia has more than thousands of large and medium rivers to generate hydropower. Kayan river in North Kalimantan province can generate 13,000 Megawatt, while Mamberamo river in Papua province can generate 24,000 Megawatt. That is only from two rivers. Why do not we immediately operate it [hydropower]? The investment amount is huge. Thus, PT PLN must find investors.
Once again, we must give this green energy its own space, its own region, the grade and transmission are also distinguished because we will distribute it to industrial areas whose products will be green products that have value, price that is higher than the usual products. It will be the same product but we can classify that the one is based on green energy, and the other one is based from coal energy. And also the price will be different.
These kinds of opportunities must be widely open, Mr. President Director (of PT PLN). Do not make the PPA (Power Purchase Agreement) process difficult, it must be calculated. Which agreement is overdue, which agreement must be done, all must be calculated. Thus, it is important to reform the PPA process so that other countries know that we have changed.
At the international working visit, in Dubai and Abu Dhabi, I met Minister of the United Arab Emirates, I met the Crown Prince of the Emirate of Abu Dhabi MBZ. What did they say to me about Indonesia? They said that Indonesia has changed. I asked them, “Which one is changing?” then they replied, “Everything is fast. I asked something, in one or two days it will finish. It is different as before; we are confused about our bureaucracy and our own state-owned enterprises. Do not let this achievement drop because all I have said is not carried out quickly.
That concludes my speech on this auspicious occasion. I told all of you firmly, it is not because I am mad. It is for the sake of our state, for PT Pertamina, for PT PLN. I expect that all what I have said can be implemented at the ground. If not, please let me know, through the Minister [of State-Owned Enterprises]. If there is an unsolved problem, political problem, please let me know, I will be ready anytime. If there is an important thing that needs a political support, please let me know, go forward, I will be behind you.
That concludes my speech on this auspicious occasion.
I thank you.
Wassalamu’alaikum warahmatullahi wabarakatuh. (AP/LW)