Abstract
Like any other corporate, state owned enterprises (SOE) main objective is to achieve optimum profit to ensure its sustainability. In Indonesia, electricity business in run by PT PLN (Persero), a corporate owned 100% by Government of Indonesia. Thus, PLN should maximize its effort on cost reduction and sales volume optimization to ensure its profitability growth. Looking at the structure of operational cost and revenue, this study aims to explore the effect of fuel mix and power losses on profitability (operating profit/loss) of PLN, where the moderating role of Indonesia crude price (ICP) and exchange rate on fuel mix effect toward profitability also take into account. By using moderated regression analysis (MRA), this study found out that the effect of fuel mix on profitability, and power losses on PLN’s profitability exist negatively. ICP and exchange rate also strengthen the effect of fuel mix on PLN’s profitability. This study suggested PLN to continue exploring ways to optimize its fuel mix and power losses, as well as increasing sales volume. This could not be done without Government intervention that favors PLN i.e., tariff adjustment or incentives, especially when exchange rate and ICP value worsen. This is to ensure that PLN has a healthy financial sustainability. Keywords: PT PLN (Persero), Electricity Tariff, Fuel Mix, Indonesia Crude Price , Exchange Rate, Power Losses, Profitability JEL Classifications: E3, L11, M11, R32, G39 DOI: https://doi.org/10.32479/ijeep.9575
Highlights
Electricity has shifted to be primary need in our daily life
From aforementioned data and literature, the proposed hypothesis is: H1a: Indonesia crude price (ICP) strengthens the effect of fuel mix on PLN profitability
From the aforementioned data and literature, the prtposed hypothesis is: H1b: Exchange rate strengthens the effect of fuel mix on PLN profitability
Summary
Electricity has shifted to be primary need in our daily life. Every activity needs electricity. As an infrastucture that affect lives of many people, electricity is needed for supporting daily activities, and as a business driver that supports the growth of economy. It is seen as the mother of investment climate, where its availability, quality and reliability effects the investment significantly (Fontana and Arifin, 2016). Considering its great economic impact, it is not surprising that major electricity business in Indonesia is run by state owned enterprises (SOE). PT PLN (Persero), further refers to as PLN, is a SOE that runs its business in electricity where its ownership belongs 100% to Government of Indonesia.
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