FINANCIAL IMPACT ANALYSIS OF CARBON PRICING ON GEOTHERMAL POWER PLANT PROJECT INVESTMENT AT PT PLN (PERSERO)

• Main Author: Heryana, Arief
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/85822
• Institution: Institut Teknologi Bandung

Climate change is a significant global issue, and greenhouse gas (GHG) emissions are the primary driver. In 2022, the energy sector was responsible for about 73% of the total global emissions. PT PLN (Persero), the state-owned electricity utility of Indonesia, has develop a strategic measures to achieve Net Zero Emissions by 2060, including renewable power plant capacity expansion and implement carbon pricing mechanisms. This study examines the financial consequences of carbon pricing on the investment in a 110 MW geothermal power plant project at PT PLN (Persero), uses quantitative methods on financial indicators such as Net Present Value (NPV), Internal Rate of Return (IRR), and Payback Period. The results demonstrate the Net Present Value (NPV) experiences a 17.00% increase, the discounted payback period decreases from 16.29 to 13.33 years, and the Modified Internal Rate of Return (MIRR) shows a 0.48% increase. The study also identify variables which have significant impact on the financial results, such as currency exchange rates and steam tariffs. Based on scenario analyses, the base case scenario shows positive NPV of IDR 855.30 billions, while the wide NPV range between worst case and best case scenarios (Rp 7,148.82 billions) indicates that the project's outcome is highly uncertain and dependent on the input variables. The Monte Carlo simulation shows that the project has a very high probability that the NPV will be positive (97.10%), indicate the project's financial stability across different scenarios. According to the study, incorporating carbon pricing mechanisms into project feasibility models improve the financial performance of renewable energy projects. However, it also important to implement comprehensive risk management strategies such as strong hedging strategies, actively negotiate to secure a long profitable steam tariffs, and explore the opportunities in international carbon markets that offer a better carbon credit price. PT PLN (Persero) need to regularly update scenario planning to ensure that the project stay resilient under various conditions.