FINANCIAL ANALYSIS OF 1×200 MW COAL BIOMASS CO– FIRING POWER PLANT EXPANSION PROJECT

• Main Author: Dimas Fhadjrin, Reynaldi
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/66753
• Institution: Institut Teknologi Bandung

The total installed capacity of power plants in Indonesia is still dominated by coal-fired power plants (PLTU) with a capacity of 36,976 MW or about 50% of the entire power plant. The reason is that coal is the cheapest energy source in the country. However, the existence of this PLTU has a negative impact, including air pollution and coal waste. The private sector's contribution to reaching the net zero-emission is still low. According to Indonesian Energy Transition Outlook (IETO), more than 80% of local companies surveyed either publicly or privately acknowledge the need to achieve net-zero emissions (NZE) following the Paris Agreement. To respond to the problem, Independent Power Producer (IPP) will support the government strategy to utilize biomass as a mixed fuel in the form of co-firing for coal power plants to encourage the achievement of NZE targets in the electricity sector. Biomass co-firing has great potential to reduce CO2 emissions because technically biomass can replace between 20%–50% of coal used by PLTU in Indonesia. PLN has carried out co-firing trials in 52 PLTUs owned by PLN with a biomass portion of 1–5%. One of the IPP’s PLTUs that will implement this co-firing technology is the PLTU Banjarsari owned by PT Bukit Pembangkit Innovative (BPI). This PLTU adheres to the resource base principle where the existing PLTU is a PLTU located at the mouth of the mine, so this technology is a suitable solution to be implemented. The company’s RJPP (2022–2026) stated that the company will expand its production capacity by 200 MW using co-firing technology. According to the expansion project, PT BPI needs to calculate the financial feasibility to identify the market, regulation and all variables used that affect the feasibility of the project. The calculation will become a base for PT BPI to enhance the business value of the project. To conduct this investment project analysis, several assumptions are needed in carrying out a financial statement projection that will be used to calculate the cost of capital or WACC. After calculating the value of the cost of debt after-tax (7.50%) and cost of equity (16.71%), it is known the WACC of this project is 10.11%. There are 2 categories of free cash flow (FCF), namely FCF to Firm (FCFF) and FCF to Equity (FCFE). In the early year, the FCFF and FCFE are negative. Only in the 3rd/4th year onwards does it have a positive value, indicating the company already has cash remaining after disbursements. This project is possible to carry out because it has a positive NPV, an IRR that is greater than the cost of capital, and a PP shorter than 10 years. Based on sensitivity analysis, out of twelve variables that can influence project profitability, Exchange rate, Electricity tariffs, and Long-Term Debt Interest rates are the most vulnerable variables. The 20% swing on these variables can give more than 40% changes in NPV value. But from the Monte Carlo simulation, the average NPV generated from 1000 iterations is USD 239,071,577.69. The probability of this project having a positive NPV value is 96.84% and the probability of this project has a negative NPV value is 3.16%.