This report profiles Indonesia’s utilities and energy industry, discussing market trends and outlook through 2013-14 and beyond. The report also highlights leading players in the sector including PT Perusahaan Gas Negara Tbk, PT Medco Energi Internasional Tbk and PT Energi Mega Persada Tbk.

While the energy sector witnessed a tough period in FY14 due to lower production, the utilities sector was more or less unperturbed by the deceleration in the overall economy. Government subsidies in the electricity sector were reduced by raising the unit prices in the second half of 2013. Though the government has tried to reduce subsidies, it still is a big drain on the country’s fiscal balance. The subsidies also make private sector participation in the electricity sector nonviable.

While Indonesia is self-sufficient as far as gas supply is concerned, current electricity generation capacity however is insufficient to meet the demand, which is set to increase even more going forward. Based on the PLN Electricity Supply Business Plan 2011-2020, demand for electricity in Indonesia is projected to grow at a pace of 8.5% per year until 2020. To cater to the need of additional demand for electricity, the Indonesian government has invited private companies to participate in the supply for public electricity through the independent power producers (IPP) programs.

Despite having about 6% of the total water resources in the world, water supply in Indonesia is characterized by low levels of access and poor quality. The Ministry of Public Works has set a challenging plan whereby more than two-thirds of the population will have access to clean water by 2015.

Key Points:

• Indonesia ranked eighth in terms of primary energy production and accounted for about 3% of the global energy production as of 2013.

• The country is highly dependent on oil and gas sector for its primary energy consumption. Petroleum and natural gas together accounted for 53% of the country’s primary energy consumption requirement.

• Total electricity production grew at a CAGR of 5.9% during 2003-13. Meanwhile, domestic consumption of electricity grew at a higher CAGR of 7.6% during the same period.

• FY14 proved to be a tough year for the economy with GDP slowing to a five-year low. The electricity, gas and water supply sector showed volatility in growth but remained more or less unperturbed by the deceleration in the overall economy.