Comparison between Escalation Factor Calculation of JICA and Poso Energy

Hydropower Plant Economic Evaluation

Afif Taufiiqul Hakim

A PRELIMINARY ANALYSIS
1 Price Index used by JICA for Economic Evaluation is from WBG indices, called MUV
(Manufatures Unit Value Index) for Foreign Currency
2 Price Index for Local Currency (Indonesia) Derived from the OECD Database
3 JICA start from 1996 for analysis, it means on 1996 the price index is determined as 100
4 JICA Combined Foreign Currency and Local Currency as 50% and 50%

B LATEST STUDY OF POSO ENERGY

1 Price index we used are based on General wholeprice Index (G), Construction Material Index (IM)
and Petroleum Index (IP). And calculated by formula 0.5G + 0.35IM + 0.15IP. For Indonesia Currency
2 For foreign currency we use Import Machinery and Import Transport Equipment (1983 sd 2011)
3 Price Escalation calculation used for updating cost formula of hydropower from PT PLN (Feasibility Study)
4 Data of Price Index collected from BPS (Badan Pusat Statistik) from 1983 - 2018 for Local Currency
Data of Price Index collected from World Bank and Pre-Feasibilty PT PLN 1971 - 2011 for Foreign Currency

C METHOD FOR COMPARING ESCALATION FACTOR OF JICA AND POSO ENERGY

1 Matching up available data of Poso Energy (Foreign Currency, 1971-2011 and Local Currency, 1983-2018)
to JICA Escalation factor calculation data (1996-2011)
2 Set the data of Poso Energy Analysis in 1996 to 100 in price Index (Local and Foreign Currency)
3 Comparing the escalation factor by modified price index based on year of 1996

D HYPOTHESIS
Due to the difference of Price Index used, the value of Escalation Factor is assumed not close enough
differences between JICA Study and Poso Energy Study. But we assumed both of them still relevant to be adopted
as economic evaluation calculation

E ANALYSIS FROM JICA

Table 1 Price Indices for Updating Cost
FC LC Total
1996 Price 50 50 100
Price Escalation 1.0224 1.3015 1.162
2011 Price 51.12 65.08 116.2

Table 2 Price Index of JICA Calculation

FC LC
Year Price Index Rupiah Index Exchange Rate Foreign Index
1996 100 125.77 2329.35 100
1997 93.02 133.61 2872.66 86.14
1998 89.5 211.7 10094.11 38.84
1999 89.2 255.05 7809.23 60.49
2000 87.31 264.46 8374.51 58.49
2001 84.74 294.87 10189.44 53.6
2002 83.68 329.97 9321.52 65.56
2003 89.96 352.26 8573.68 76.09
2004 96.16 373.63 8934.84 77.45
2005 96.16 412.68 9714.67 78.67
2006 97.7 466.77 9165.12 94.32
2007 102.29 496.68 9141.98 100.62
2008 109.15 547.47 9663.93 104.92
2009 104.56 571.49 10380.69 101.96
2010 105.29 600.83 9081.83 122.53
2011 102.24 633.88 9020 130.15
F ANALYSIS
Table 3 Price Index of Rupiah Currency (Latest Study)
Year IG IM IP 0.5G+0.35IM+0.15IP
1983 100.00 100.00 100.00 100.00
1984 108.00 106.50 103.50 106.80
1985 116.00 113.00 107.00 113.60
1986 116.00 119.00 107.00 115.70
1987 142.00 132.00 146.00 139.10
1988 149.00 145.00 169.00 150.60
1989 162.00 160.00 177.00 163.55
1990 178.00 175.00 192.00 179.05
1991 187.00 190.00 222.00 193.30
1992 197.00 200.00 237.00 204.05
1993 204.00 213.00 264.00 216.15
1994 215.00 224.00 265.00 225.65
1995 240.00 246.00 274.00 247.20
1996 258.00 261.00 280.00 262.35
1997 285.60 272.64 271.92 279.01
1998 587.52 449.43 340.56 502.14
1999 640.56 506.94 401.28 557.90
2000 720.12 560.19 440.88 622.26
2001 822.12 624.09 578.16 716.22
2002 844.56 660.30 813.12 775.35
2003 862.92 698.64 910.80 812.60
2004 936.36 775.32 960.96 883.69
2005 1087.38 929.92 1935.46 1159.48
2006 1238.61 1148.39 3094.98 1485.49
2007 1404.23 1299.64 3156.70 1630.50
2008 1771.50 1618.95 4126.64 2071.38
2009 1772.43 1729.64 3890.28 2075.13
2010 1859.42 1776.14 4064.47 2161.03
2011 1989.91 1841.23 4335.44 2289.70
2012 2098.65 1924.92 4606.40 2414.01
2013 2231.31 2007.04 4592.85 2507.04
2014 2454.44 2149.13 5365.10 2784.18
2015 2566.00 2273.46 5121.24 2846.90
2016 2770.54 2308.98 4430.28 2857.95
2017 2900.70 2362.26 4714.79 2984.36
2018 3030.86 2433.31 4958.66 3110.89

Table 4 Price Index of MUV (Latest Study)

Year Price Index Escal. Factor Year Price Index Escal. Factor
1990 99 1.157 2005 100 1.150
1991 95 1.211 2006 102 1.127
1992 99 1.162 2007 106 1.085
1993 99 1.164 2008 114 1.009
1994 102 1.124 2009 107 1.075
1995 107 1.076 2010 110 1.045
1996 110 1.041 2011 115 1.000
1997 - - From World Bank
1998 - -
1999 - -
2000 91 1.264
2001 - -
2002 - -
2003 - -
2004 - -
Table 5 Index of Imported Machinery (IM) and Imported Transport Equipment (ITE)
Year IM ITE Average Exchange Rate
1996 235 234 235 2405
1997 253 253 253 5915
1998 551 595 573 14800
1999 655 662 659 7900
2000 652 687 670 9725
2001 688 749 719 10265
2002 662 734 698 9260
2003 662 759 711 8570
2004 680 773 727 8985
2005 734 832 783 9705
2006 788 917 853 9200
2007 830 1003 916 9125
2008 1021 1234 1128 9666
2009 951 1148 1050 9447
2010 956 1155 1056 9036
2011 1130 1246 1188 9113
Data provided by Badan Pusat Statistik is the latest update (2018). But, because we have to compare between the JICA
analysis and Poso Energy, so that datas used are till 2011. Due to its condition, some constraints we have to set are
1) at year of 2011, the escalation factor set to 1,00
2) Price index at year of 1996 set to 100
3) Range of calculation set from 1996 to 2011

Table 6 Calculation of Adopted Escalation Factor (E.F.) for Local Currency

Year LC Escal. Factor Exchange Rate Escal. Factor in US$ Adopted L.C E.F.
1996 262.35 8.73 2405 2.30 2.30
1997 279.01 8.21 5915 5.33 2.73
1998 502.14 4.56 14800 7.41 2.73
1999 557.90 4.10 7900 3.56 2.73
2000 622.26 3.68 9725 3.93 2.73
2001 716.22 3.20 10265 3.60 2.73
2002 775.35 2.95 9260 3.00 2.73
2003 812.60 2.82 8570 2.65 2.65
2004 883.69 2.59 8985 2.55 2.55
2005 1159.48 1.97 9705 2.10 2.10
2006 1485.49 1.54 9200 1.56 1.56
2007 1630.50 1.40 9125 1.41 1.41
2008 2071.38 1.11 9666 1.17 1.17
2009 2075.13 1.10 9447 1.14 1.14
2010 2161.03 1.06 9036 1.05 1.05
2011 2289.70 1.00 9113 1.00 1.00
Average 1142.76 3.13 8944.81 2.73 2.08

After we calculate the Escalation Factor for Local Currency, then we calculate the Escalation Factor
from World Index Price, then combined them to be adopted escalation factor. Things we've to calculate
next are,
1) Escalation factor for foreign currency based on Imported Machinery (IM) and Imported Transport Equipment (ITE)
2) Combine the escalation factor of IM and ITE with escalation factor of Manufactured Export (MUV)
 Table 7 Calculation of Adopted Escalation Factor (E.F.) for Foreign Currency
Year Average Exchange Rate Escal. Factor Escal. Factor MUV Adopted F.C E.F
1996 235 2405 1.34 1.041 1.19
1997 253 5915 3.05 - 3.05
1998 573 14800 3.37 - 3.37
1999 659 7900 1.56 - 1.56
2000 670 9725 1.89 1.264 1.58
2001 719 10265 1.86 - 1.86
2002 698 9260 1.73 - 1.73
2003 711 8570 1.57 - 1.57
2004 727 8985 1.61 - 1.61
2005 783 9705 1.62 1.150 1.38
2006 853 9200 1.41 1.127 1.27
2007 916 9125 1.30 1.085 1.19
2008 1128 9666 1.12 1.009 1.06
2009 1050 9447 1.17 1.075 1.12
2010 1056 9036 1.12 1.045 1.08
2011 1188 9113 1.00 1.000 1.00

Then based on Adopted Escalation Factor of Foreign Currency and Local Currency, we can take the average.
It will be shown on Table 8 as follow

Table 8 Adopted Escalation Factor

Year L.C E.F F.C E.F Adopted E.F
1996 2.30 1.19 1.75
1997 2.73 3.05 2.89
1998 2.73 3.37 3.05
1999 2.73 1.56 2.15
2000 2.73 1.58 2.16
2001 2.73 1.86 2.30
2002 2.73 1.73 2.23
2003 2.65 1.57 2.11
2004 2.55 1.61 2.08
2005 2.10 1.38 1.74
2006 1.56 1.27 1.41
2007 1.41 1.19 1.30
2008 1.17 1.06 1.12
2009 1.14 1.12 1.13
2010 1.05 1.08 1.07
2011 1.00 1.00 1.00

G CONCLUSION

Table 9 Price Escalation 1996-2011

Price Escalation FC LC Total
JICA 1.02 1.30 1.16
Poso Energy 1.19 2.30 1.75

Based on data shown on Table 9 above, analysis from Poso Energy give greater value for Price Escalation
The greater value of price escalation is because we use the price index from Local Currency that had big increasement
during 1996 until 2011 such as wholeprice Index (G), Construction Material Index (IM) and Petroleum Index (IP)
While JICA use OECD Price Index that had small increasement during 1996 until 2011