TEMPO.CO, Jakarta - Murtaqi Shamsuddin, director of planning and development at state power company PT PLN, said there is potential for the company's debt to swell in coming years. The debt surge is predicted to be the result of PLN's business model that is not proportional to the company's job to provide electricity for the people.

"PLN sells electricity at a price set by the government, but the production costs the company uses economical price," Murtaqi said, yesterday.

Based on PLN's financial statements in 2013, the company has a total liability of Rp462.6 trillion with a total equity of Rp133.2 trillion. PLN's debt-to-equity ratio (DER) per 2013 stood at 3.47 times or 347 percent.

If the huge debt is not immediately addressed, Murtaqi said, PLN's DER will continue to soar. "By 2018, the company's debt-to-equity ratio could reach 360 percent," he said.

This condition can be prevented if the government disburses equity to PLN. Alternatively, Murtaqi said, the government could give the company the freedom to develop internal financing.

"It could also be done by increasing PLN's margin so that the debt amount could be reduced," he said.

Murtaqi estimated the demand for electricity will grow 7.5 to 8.0 percent per year. To meet the demand, PLN requires an annual capital expenditure (capex) of Rp120 trillion (US$12 billion).

PLN president director Nur Pamudji had expressed his hope that the government will pay PLN's power subsidy receivables as soon as possible, since the company has grave needs for investment funds. "The subsidies that are paid every year are mostly used for operational costs," he said.

Minister of Energy and Mineral Resources Jero Wacik admitted that the government still owes PLN Rp21.79 trillion in electricity subsidy, which is a carryover from 2013, 2012, and previous years' debt. "Every year, the subsidy carry-over could not fully be paid," Wacik said.

The House of Representatives' (DPR) Energy Committee work meeting on Tuesday set the current year's subsidy at Rp86.84 trillion. The payment of the government's remaining subsidy debt to PLN will be decided later by the House's Budget Committee.

AYU PRIMA SANDI | BERNADETTE CHRISTINA MUNTHE