Quo vadis steam power plant in Indonesia? Implementation of GE-McKinsey matrix analysis on creating the strategy for steam power plant business entity

Abstract

Although today Indonesia develops renewable energy actively, the energy mix for Steam Power Plant is still dominant at 27% based on RUPTL 2019-2028. Lots of entities are involved in business related to a steam power plant in Indonesia, ranging from mining companies, coal transport companies, and steam power plants owned by PLN, PLN’s subsidiaries, and IPP. This paper aims to conduct an internal and external analysis of the condition of the steam power plant industry and market in Indonesia and to determine the strategies and policies for the management of entities involved in business related to Steam Power Plant. Internal and external analysis is performed using PESTEL Analysis, Porter Analysis and Resource Based Analysis. Then, an analysis is conducted to evaluate the current condition of the portfolio using the GE McKinsey Matrix Analysis to assess the business strength and industry attractiveness of each entity. Based on those analyses, IPP Coastal Steam Power Plant should not only develop Medium Rank Coal-based power plants, but also HRLS (High-Risk Low Sulphur) coal, which is still large in reserves and coal prices tend to fall and has the potential to be sold on the domestic market rather than being sold to the import market (which tends to start leaving behind fossil plants and increasing the share of renewable energy). IPP Mine Mouth Power Plant should start to use Medium Rank Coal (not only Very Low-Rank Coal), considering that there is still a lot of Medium Rank Low Sulphur (MRLS) and Medium Rank High Sulphur (MRHS) coal. As a coal concession owner, not only looking for low-rank concessions or very low-rank coal to be acquired but also looking for medium coal rank (MRLS or MRHS) concessions, especially in Sumatra, which at present valuation will be at a low value.