PLN Java Bali Power Company I, Inc. or PLN PJB I is the subsidiary of PT. PLN (Persero), the State Electricity Corporation. It was established to enable the State-Owned Enterprise to anticipate changes in business environment and more competition from the private sector participation. To finance this business move, PLN PJB I planned to go public through an Initial Public Offering.

From the capital market point of view, PLN PJB I has to align its strategy and program with the listing requirements, particularly those of the domestic stock exchanges, but also those of the major foreign ones for crosslisting.

Apart from a good capital market strategy, PLN PJB I also needs to ensure the soundness of its performance. PLN PJB I's financial performance was analyzed using fOIJr criteria. Its liquidity was found to be poor, mainly because of overdue payment from PT. PLN (Persero). It is moderately efficient in terms of the low inventories, has a low leverage and a reasonable profitability. PLN PJB I's performance was also benchmarked against other similar power generating companies in Asia.

The unimpressive financial indicators certainly require some improvements in PLN PJB I's operation. These ongoing improvements would include specific programs customized for the company, based on a SWOT analysis. A financial projection was set for the ten-year 1997 to 2006 period, assuming all the programs were in place.

Based on the financial projection, the IPO stock price was estimated using different valuation methods, such as asset-based, earnings-based, dividend-based and PIE comparison. This price, coupled with an appropriate discount would generate market capitalization that can be absorbed merely by the domestic capital market. In normal situation, a foreign listing would be recommended to obtain objective valuation from investors familiar with the power generation business. In time of economic crisis, with fluctuating foreign exchange rate, it was suggested that the IPO should be carried out on domestic market only



Research Location: PLN PJB I

Supervisor: Manggi T. Habir, MBA

Accepted on December 1997



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