Report of the Board of Commissioners

Shareholders and stakeholders,

The Board of Commissioners expresses gratitude to the presence of Almighty God for the success of the Company through the business journey well in the midst of the Covid-19 pandemic conditions in 2021.

The implementation of the duties of the Board of Commissioners as Supervisor, carried out through the Board of Commissioners' meeting with the Board of Directors, as well as the implementation of the duties of the Audit Committee, as well as direct observation of the company's operations, we consider that the Board of Directors has carried out its duties and responsibilities in managing the company professionally during 2021.

Business Strategy During 2021

The Board of Commissioners considers that the strategy implemented by the Board of Directors is in accordance with the challenges faced by the company. The challenges faced by the company are, firstly, the non-operation of hydroelectric power projects which are the company's business base. The second challenge is, the long duration of the due diligence implementation by the company's strategic partners on power plant projects owned by the company, where the due diligence implementation will take place from April 2021 to January 2022.

The strategy carried out by the Board of Directors is, continue to carry out power plant maintenance services through joint operations (KSO) and NonKSO with the company's business partners who have a long-term history of cooperation with the company's founders, while carefully accommodating the implementation of due diligence carried out by strategic partners. company. KSO and Non KSO managed to create service sales of Rp38 billion during 2021 and contributed to the company's net income during the period of 2021 of Rp7.9 billion, an increase from Rp4.7 billion in the same period in 2020.

The results of the due diligence conducted by the strategic partner succeeded in determining financing certainty for 3 (three) PLTM projects, namely the Sisira PLTM with a capacity of 2x4.9 MW; PLTM Batang Toru-3 with a capacity of 2x5 MW and PLTM Batang Toru-4 with a capacity of 2x5 MW. The realization of this agreement is contained in the Share Subscription Agreement (SSA) signed on 27 August 2021 and the Development Loan Agreement (DLA) signed on 21 January 2022.

Opportunities for the Company to Contribute in New Renewable Energy Industry in Indonesia

In the last five years, the addition of NRE generating capacity was 1,730 MW with an average increase of 4.3% per year. The installed capacity of EBT PLT in 2021 will reach 654.76 MW from the target of 854.78 MW. Additional NRE (New Renewable Energy) power plant capacity in 2021 is 654.76 MW, including from PLTA Poso Peaker Expansion #1-4, PLTA Malea, 3 PLTP units, Bioenergy PLT, 18 PLTM units, and 7 PLTS and Rooftop PLTS.

The Company has a hydropower project with a total capacity of 510.8 MW or 30% of the total additional capacity of EBT for the last 5 years, thus the opportunity for the company's contribution to the NRE power plant industry in the country is very large.

Based on data from the Director General of New Energy, Terbarukan, and Energy Conservation (EBTKE) of the Ministry of Energy and Mineral Resources, until the end of 2021, the renewable energy mix (EBT) reached 11.5% or equivalent to 168.7 million barrels of oil equivalent (MBOE). This mix figure increased slightly when compared with the position of the EBT mix at the end of 2020, which was 11.2 percent or equivalent to 163.2 MBOE.

The increase in the EBT mix per the end of 2021 was driven by a number of things, including : the increase in biofuel utilization and the increase in EBT power generation capacity that was already on the grid with the PLN system. The achievement of the EBT mix as of the end of 2021, although it has increased compared to the position at the end of 2020, is still below the target.

Initially, the EBT mix is targeted to reach 14.5% or equivalent to 319.3 MBOE by the end of 2021 according to the General Plan of Nasional Energy (RUEN). The realization of the mix that is still below the target is due to a number of factors, including; : Delay of commercial operation date (COD) of several EBT power plant projects due to the Covid-19 pandemic in 2021.

In the Business As Usual scenario designed by BPPT, it is estimated that during 2018-2050, the total final energy needs increased by an average of 3.9% per year. As an economic driver, energy needs in the industrial sector are expected to continue to increase and dominate the total final energy needs by 2050. This is combined with the need for electricity to meet industrial operations. With this information, the concern that the demand for electrical energy in Indonesia is already saturated so that the power plant project owned by the company's output cannot be accepted by the buyer (PLN) is refuted by this information.

The company's prospects in 2022 still require extra efforts as in 2021, considering that the construction period for hydro power plant projects requires a fairly long development time, namely 18-24 months for PLTM and 30-36 months for PLTA. So the Board of Directors must be able to convince strategic partners so that the construction implementation of projects that have gone through due diligence must be built in 2022.

Detailed planning and well-organized project organization are required, as well as good communication with various parties, especially with PLN as a buyer, strategic partners as investors, EPC Contractors and other related parties; so that the implementation of the construction of the first 3 (three) PLTM projects can proceed according to plan.

Closing

Finally, the Board of Commissioners appreciated and thanked the Board of Directors for their dedication so that the Company managed to get through a challenging 2021.

We also thank all management and employees who have worked hard together to advance the company. To the Management of PT PLN for North Sumatra Province and the Management of PT PLN for the Special Region of Nanggroh Aceh Darussalam, to the Management of PT Waskita Karya (Persero) Tbk, PT Global Hidro Energi Indonesia, and other business partners, we also thank you for the support and trust that have been given so that the company managed to record a good performance.

The Board of Commissioners also expresses its highest gratitude to the Shareholders, Regulators and all stakeholders who have provided support. We hope that this well-established collaboration can continue to be improved in the future.

 

Jakarta, June 25th 2022

Ngurah Adnyana
President Commissioner