ABIMANYU SUYOSO, President of PT. Indonesia Power

ith more than 25 years experience in the power generating business, Bapak Abimanyu Suyoso, President Director of Indonesia Power, has keen insight into a sector that experts say will continue its current high growth rate for the next two to three decades. In an exclusive interview, Mr. Suyoso shares his views on the market and Indonesia Power's plans to remain the top player in the industry.

Could you share with our readers what have been the highlights of your career to date?

I graduated as a Mechanical Engineer from ITB, Bandung Institute of Technology, and I have a Master of Management. I was in the power generating business for more than twenty-five years, most of the time with PLN. I'm acting now as the President Director of Indonesia Power.

Indonesia has an installed electricity generating capacity estimated at twenty-one point five gigawatts. Given the estimated growth in demand of about ten percent a year, the adverse effects of the Asian financial crisis and the large amounts of debt this has created, to what extend do you agree with analysts who claim that Indonesia is potentially facing an electricity supply crisis?

The electricity tariff is low in Indonesia, but the electrification ratio is only around fifty-three. However, this country is energy-hungry and analysts estimate that the demand will grow at seven to nine percent a year for the next decade. During the 1997-2000-crisis period, demand grew annually by eight percent, but after 2002, because PLN implemented actions that slowed growth, only by four percent. Before the crisis, Indonesia grew at a rate of fourteen percent per year.

When interviewed Bapak Sugiharto, he said that growth in electricity infrastructure is fundamental to a prosperous Indonesian economy. PT Indonesia Power, previously PT PJB1, is the leading power generating company in the country, which mainly serves the Java-Bali grid, with 8 generating business units. How do you define Indonesia Power's role in contributing to the national economy?

That is correct. Indonesia Power is the largest power generating company in Indonesia. Moreover, electricity demand in Java and Bali has an annual growth of seven to nine percent. Indonesia Power produces nine thousand Megawatts. However, we will have to increase our production by seven percent a year to meet demand.

Indonesia Power currently supplies about forty-six percent of Java and Bali, but with your capacity you could supply up to fifty-seven percent of this area.

Earlier, Indonesia Power could supply fifty-seven percent of the Java-Bali requirements. However, our capability declined to forty-six percent because of the company's difficulty to find new capital for investment.

What are you views on Indonesia's short to medium term prospects in developing key infrastructure, and what will that mean for Indonesia Power?

We are concerned with Indonesia's Growth Domestic Product, which is very low, at around six hundred US dollars per capita. There is a correlation between electricity demand and Growth Domestic Product, especially when GDP per capita is below five thousand US dollars. At that stage, if the Growth Domestic Product increases, the electricity demands will double that figure.

The electricity consumption in Indonesia is concentrated in Java and Bali, representing eighty percent of the national total demand.

Yes, those two islands consume between seventy and eighty percent of the electricity in Indonesia.

We have been studying the impact of decentralization on the economy. We have interviewed key officials at the Ministry of Home Affairs as well as Governors and Bupatis throughout the archipelago. We got a clear picture of very different levels of economic development. Where do your foresee growth in electricity demand coming from within the archipelago in the medium-term?

The fastest growing market after Java and Bali is Sumatra. Sumatra, especially the southern part of the island, is very rich in natural resources like coal and gas. That is why Indonesia Power is developing a wide network in this area. I know this part of the country very well, as I was Indonesia Power's General Manager for Southern Sumatra.

The government has canceled the New Electricity Law of 2002, which gradually would have opened the market to national and foreign companies. Do you still think that the electricity market will be liberalized?

From an investor's point of view, Indonesia's electricity market is growing really fast. As the electricity demand is jumping, I would want to invest in Indonesia, so I would look for local partners. Indonesia Power has survived all the major crises and will naturally represent the most suitable partner for any foreign companies wanting to take a stake in this promising market.

You have indeed been a very stable organization in Indonesia while the market has been continually changing.

Our Initial Public Offering, planned for next year, will add great value to Indonesia Power, as it will increase the investor's confidence in our company. I want Indonesia Power to be a top world-class company. Indonesia Power is already better than most of the North American Power companies in terms of operational performance.

You're planning your Initial Public Offer in 2006. From which markets are you hoping to raise the capital?

The PLN equity in Indonesia Power is around forty-four to forty-five trillion Rupiah. If we offer five to ten percent of it, or up to four hundred million US dollars, it might be difficult to sell all the shares on Jakarta Stock Exchange. We are also looking at selling them to foreign organizations, and that is why we have had road shows in San Francisco, Boston, New York, London, Hong Kong and Singapore.

Where are you planning to be listed?

On the Jakarta Stock Exchange

What are you looking to use that capital for?

We will use that capital to build new plants in Java, Bali and certain parts of Sumatra.

How do you foresee Power Indonesia's future? Will the company become a fully independent entity, either public or private?

This could happen one day, but the majority shareholder still remains PLN, as it needs Indonesia Power's revenue to develop electricity throughout Indonesia.

When will this Initial Public Offer be taking place?

Our Initial Public Offer will take place during the first semester of 2006, probably around June.

Pak Abimanyu, you are today at the head of a very healthy company. Before that, you were holding several positions at PLN. What, to date, has given you the greatest sense of reward or achievement?

I have been with PLN since 1979. I love this company. I have set it as my goal to make Indonesia Power a world-class organisation. I place considerable importance on Human Resources, as the people in this company are the key to its success.. That is why we have a strong corporate culture.

How are you going to do more of that in the future?

This is not an easy task. There are two competencies: the soft competencies and hard competencies. Hard competencies are easy to develop, while soft competencies are more challenging. That's the reason why we developed a cohesive corporate culture. Within Indonesia Power you find integrity, professionalism, harmony, excellent quality of service, care and innovation. However harmony is the most important. We aim at maintaining harmony in our company.

What is Indonesia Power doing in terms of Corporate Social Responsibility?

Indonesia Power is focused on community development. We have many community development programs, one being the reforestation in Cirata, Central and West Java. Indonesia Power is committed to help the communities living around our plants. We help the villages by building mosques, schools or small capacity power plants that use lower-rank coal to produce cheap electricity. The electricity ratio in Indonesia is fifty-three percent, because of the lack of infrastructure and the important part of the population that live in remote areas. It would cost a lot of money to supply electricity to small and remote villages, and those people are poor and cannot afford it. That is why we have developed and built more economic coal power plants.

Do you have a final message to our readers?

There are five reasons why investors should be interested in Indonesia Power. Firstly, electricity demand in Indonesia is booming. Secondly, Indonesia Power has outstanding operational performance. Thirdly, Indonesia Power has excellent financial records. Fourthly, we have plans to build an extensive network of new power plants. And finally, nobody knows the market better than we do.

Thank you very much.