Citation:

Anggita Tri Ayuningtyas, Raden Aswin Rahadi, Acep R Jayaprawira. "Project Financing Modeling as A Tool to Manage Project Profitability for PLN (Case Study: Rajamandala Project)" International Research Journal of Economics and Management Studies, Vol. 4, No. 4, pp. 123-133, 2025.

Abstract:

Indonesia has struggled to transition from coal mining to renewable energy. Transitioning to renewable energy has been an aim for PT Perusahaan Listrik Negara to achieve Indonesia's goal of reducing carbon emissions and ensuring sustainable power generation. However, PLN faces difficulties in financial funding for renewable energy, merely on hydroelectric power. This research aims to implement project financing to help projects optimize profitability, reduce risk, and attract investors. Using an existing hydroelectric power plant case from PLN called Rajamandala hydropower plant as an example to assess the financial performance during the feasibility study, completion, and operation & maintenance stages. The research resulted in the Rajamandala project facing concerns about profitability due to cost overruns, construction delays, and low electricity production. During the feasibility stage, the project yielded a promising IRR equity of 12.25% and an IRR project of 7.95%, bigger results than the project WACC of 7.52%. The result declined during the completion stage due to construction delay, which caused the project to have overrun cost and resulted in the decline of IRR Equity 7.82% and IRR project 3.68%, causing NPV performance to negative -39.6234 MUSD. In the O&M stage, the financial model incorporated carbon credit revenue to support the project performance, increasing IRR equity by 8.20%, an IRR project of 4,21%, and an NPV of 34,8530 MUSD. However, the project still struggles to exceed its weighted average cost of capital (WACC). The research recommends re-constructing a more flexible financial structure, conducting risk analysis, and adaptive pricing strategies to avoid financial trouble. By incorporating these recommendations, PLN can improve projects' sustainability in the long run and increase attractiveness to investors. These key aspects are important as a support action plan for Indonesia's increase of EBT projects, reduce emissions, help transition to green energy, and serve as a reference guide for future hydroelectric power plants.

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Keywords:

Construction, Cost Overrun, Feasibility, Financial Model, Pricing Strategy, Profitability and Risk Management, Project Finance.