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Jakarta,11 June 2002 Implementation of GCG in PT. IP 1
The Mapping
Formulation and Implementation of
Good Corporate Governance
in PT Indonesia Power
By:
Herman Darnel Ibrahim, Ir.,MSc.
Member of Board Director and Senior Vice President of Systems
and Human Resource of PT Indonesia Power
Presented at:
The 3rd ASEAN Advanced Management
Development Program
Jakarta, 11 June 2002

Part 1: Indonesia Power At A Glance
Part 2: Background of Implementing Good Corporate Governance
Part 3: Mapping of GCG Practices In PT Indonesia Power
Part 4: Formulation of Code of Conduct
Part 5: Socialization of COC and Implementation of GCG
Part 6: Summary and Conclusions
Agenda of Presentation

Part 1 :
Indonesia Power At A Glance

Indonesia Power In Brief
• Established on October 3, 1995 [previously known as PLN.PJB I] wholly
owned by PT PLN, focusing on power generation business;
• It was originally the unbundled assets of PLN in Java and Bali, most of it
came from PLN KJB, a former division of PLN, responsible for the
generation and transmission in the Western Java Region;
• The company has various types of power plant, I.e.: hydro, thermal, gas fired,
combined cycle, geothermal and diesel;
• There are 140 generating units with total capacity of more than 9,000 MW,
spread out strategically in Java and Bali, managed and operated by 8
generation business units [GBU] under the company;
• It has also 1 maintenance Business Unit and 2 subsidiaries, namely
PT Cogindo Daya Bersama [CDB] focusing on co-generation, and
scattered generation services, and PT. Artha Daya Coalindo [ADC]
focusing on coal trading;
• The company employs 3788 people.

What Changes Becoming Subsidiary?
Before Subsidiary :
•Business Unit
•Operational Responsibility
•Monopolistic
•Rigidity in Practice
As Subsidiary :
•Independent Legal Entity
•Business Responsibility
•Competitive Environment
•Greater Flexibility

The First 5 Years Performance Highlight
No Description 1996 1997 1998 1999 2000
1 Plant Capacity, MW 5685 6836 7386 7318 9039
2 Asset Value, Rp. Billion 5462 8397 11839 12201 15444
3 Energy Sales, TWh 26.4 28.2 30.3 33.1 40.2
4 Revenue, Rp. Billion 2171 2315 4502 5163 6668
5 Net Income, Rp. Billion 231. 8 46.1 64. 5 287. 8 358
6 Number of Employee, 3822 3807 3762 3709 3697
7 Capacity per Employee, MW 1. 48 1. 79 1. 96 1. 97 2. 38
8 Revenue per employee, Rp. Million 568 608 1196 1392 1756
9 Equiv. Availability Factor, percent 81.7 80.1 77.2 81.3 82.4
10 Energy sales growth, percent NA 6.8 7.4 9.2 21.5
While maintaining its reliability at high level, the company has been
steadily showing the performance improvements and its ability to grow

How We Relate to PT PLN?
PT. PLN is the sole Shareholder and simultaneously is the single buyer of
the electricity produced by
PT. Indonesia Power.
Vision and Mission of the Company
Vision
To be a public company with world class performance and
environmentally friendly
Mission
To engage in the business of electricity and pursue related
businesses in accordance with the sound business principles
towards ensuring long-term and lasting growth

Part 2 :
Background of Implementing
Good Corporate Governance [GCG]

Shareholder Concept:
• Focus on maximize the
benefit of shareholders
• Short Terms Profit
• Did not consider the
corporate negative
externality
Paradigm Shift
Stakeholder Concept:
• Focus on necessity balance
over all major stakeholders
• Sustainable Operations
• To Become a Good Corporate
Citizen
What We Understand?

Our Transformation Strategy
Mobilization
Corporate
Transformation
Strategy
PT. IP
A World
Class
Genco
To build with
focus and speed
an alignment
between the
leaders of
Indonesia
Power and the
business
strategy
Leverage the
clarity of the
leaderships
intent more
broadly into
PT. IP’s
middle
management
•Organization
Review
•Good
Corporate
Governance
•HR Management
based on
Competency
•New Corporate
Culture
PT.IP
Today
Alignment

Attitude
Skill
Knowledge
Competence Based HR Management
The Soul For Healthy Company
‘New’ Corporate Culture
Management System,
HR Management
5 C: Concept, Competencies,Connection,Caring, Credibility
Indonesia Power As World Class Power Company
People of Indonesia Power
‘Achieving’The Vision Through People

In 1998 as monetary crisis stroked Indonesia, the price of
electricity dropped from higher than 7 cents per kWh to less
than 2 cents per kWh, which affecting an enormous pressure
to PLN
Pressure Due To the Economy Crisis

What Does The Impact of The Crisis?
• Operating costs exceed the rate of tariff, and subsidy payment
less than the price gap
• PLN equity deteriorating [in 2000 PLN equity simply negative]
• Put PLN has to pass through the pressure to Indonesia Power
by managing Indonesia Power selling price low
[below of its economic price]

How Do We Anticipate?
• Focus on and maintain the system reliability
• Develop a strong and highly competence skill based team
• Build the Corporate Image that suited as A Good
Generation Company
• The most important is, to manage our Company according
to the standard of “Good Corporate Governance“

Factors Accelerating
the Implementation of GCG
• Minister State Own Enterprises Decree No. 23, 2000:
Development of Good Corporate Governance Practices in
Government Owned Company
• The Board of Director’s commitment to the General
Meeting of Shareholder [GMOS], on their appointment in
2000
• Preparation of the Company’s Initial Public Offering

Stage 1
Gap
Identification
and
Assessment
Stage 2
Establish
The Code
of Conduct
Stage 3
Socialization
Of COC and
Implementation
Of GCG
Stage 4
Audit for
GCG
Practices
Mapping Formulation of
Code of
Conduct
And Issuing As
Board Decision
Stages In Implementation of GCG

As we realize the importance of the implementation of
we already conducted, with assistance of GCG Consultant;
mapping of
GCG Practices in PT Indonesia Power
and the formulation of
Code of Conduct of GCG
What We Do Next?

Part 3 :
Mapping of GCG Practices
In PT. Indonesia Power

Good Corporate Governance Principles:
Fairness
Transparency
Accountability
Responsibility

Mapping : What Components
Are Evaluated In GCG Mapping?
• Ownership structure
• Financial stakeholder relationship
• Financial transparency and information disclosure
• Boards structure and processes
• Risk management and strategic planning
• Other stakeholder concern
• Good Corporate Governance Code and implementation

• Human Resources Management
As we introduced our new performance evaluation,
compensation based on performance, fair promotion and
demotion procedures, right to union, continuous training
and education for employees
• Environmental Concerns
As we simultaneously develop, maintain and improving the
awareness of environmental protection
What We Do Best? [1]

• Our Financial Transparency
In regards that we are not a Public Company, what we
already establish is merely satisfying for public disclosure
• Community Concerns
As our well-designed community development will
always try to benefit the social welfare of the local
community through our programs, as part of our social
responsibility.
What We Do Best? [2]

• Associations with Our Financial Stakeholders
We simply have to map our current financial stakeholders
in broader view as we partly inherited from our holding.
• Information Disclosure
To attract more potential investors we still have a lot to
learn about marketing our business, especially about
information disclosure.
What We Still Have to Improve? [1]

• Effectiveness of Management Control System
A preventive aspect need to be considerably put up as
an early warning system for the Company.
• Procurement System
We have to put more attention to the higher integrity of
the system.
What We Still Have to Improve? [2]

Within Our Control :
• Risk Management
We have to reduce our open potential risk.
• Role of Corporate Secretary
We have to improve the inter-department communications.
• Board of Directors
Board Manual, Perception on GCG.
What We Are Still Behind? [1]

Beyond Our Control :
• Shareholder as a single buyer
The position of PT. PLN as the sole shareholder and as the single
buyer of the electricity produced by PT Indonesia Power may
potentially result in transactions which might not be in accordance
with Corporate Law and GCG Principles.
• Strategic Planning
In general, the Company’s strategic planning seems adequate
enough, but a lot of external factor also affecting in a great deal,
such as arbitrary tariff setting.
• Independent Commissioners
As GCG principles requiring us to have one, we simply can not
have one until General Meeting of Shareholders [GMOS] decided.
What We Are Still Behind? [2]

Mapping: Assessment Result and
Some Critical Factors for Improvement
No. Subjects Good Improvement
Needed
Poor
1. Ownership Structure V
2. Financial Stakeholders
Relationship
V
3. Financial Information
Transparency and Disclosure
V
4. Structure and Process of the
Board of Directors and the
Board of Commissioners
V
5. Risk Management and
Strategic Planning
V
6. Other Stakeholder Concerns V

“In our opinion, PT Indonesia Power has fairly practiced good
corporate governance in its operations.
The overall result of good corporate governance of PT
Indonesia Power is fair”
“[One of] our recommendation is that PT Indonesia Power
must enhance the quality of strategic analysis by focusing more
on the needs of the analysis and its objectivity.”
[Quoted from the Consultant Final Report Dated 28 February 2002].
GCG Findings?

Part 4:
Formulation of Code of Conduct [COC]

• Mapping : Assessment of how far the principles of Good
Corporate Governance have been implemented in Indonesia
Power
• Formulating: Formulate the Code of Conduct [COC] on
Good Corporate Governance, and consult the Draft of COC
with Board of Director
• Agreeing: Discuss the Final Draft of COC with Board of
Director, Senior Managers, General Managers and
Employee Union for agreement and support
• Issuing: Issue the Code of Conduct on Good Corporate
Governance as A Board of Director Decision
How We Formulate the Code of Conduct?

Formulation the COC :
The Structure of Code of Conduct
• General Code of Conduct
Containing the regulations or general standards implemented by
the company. The regulations or standards are used as basic for the
more specific code or technical regulation. Basically, the Codes
contain basic-shared values.
• Specific Codes
The existence of the Specific Code is needed to explain aspects
related to the business process, tasks, functions and procedures that
need to be done by or in the company or anything related to the
external side of the company. The Code also contains good basic-
shared values, which is special to the process or basic-shared
values that have already been written in the Code as a stress of how
important the values are.

• Business Integrity.
• Employees and Industrial Relations.
• Safety, Health and the Environment.
• Community Partnership.
• Political Involvement.
• Technology.
• Fair Business Competition.
• Risk Management.
Formulation of COC :
What We Govern In General COC?

• False Statements, False Claim and Conspiracy.
• Conflict of Interest.
• Gifts.
• Kickback.
• Relationship to Government Officials and Personnel.
• Corporate Record and Confidential Information.
• Fraud and Similar Irregularities
• Confidential Reporting of Alleged Code Violations.
Formulation of COC:
What We Govern In Specific Codes?

Part 5:
Socialization of COC and
Implementation of GCG

Who are Responsible and Involved?
Advised and Supervised by:
Board of Commissioner
Managed by:
Board of Director
Supported and Operated by:
Middle Management
Whole Employee
Good
Corporate
Governance

GCG
National
Committee
Guidance
Law And
Regulation
In
Force
Vision
Mission
Corporate
Objective
Corporate or
Industry
Best
Practices
Internal
[PT.IP]
Best
Practices
Good Corporate Governance Code
Technical Regulation
Review
Corporate Culture
Implementation Process of GCG
Socialization
Implementation

Socialization of COC:
How We Socialize the Code of Conduct?
• Establish a Task Force, with management and employee
union as representatives as members
• Carry out Training for Trainers on Code of Conduct for the
members of the Task Force
• Socialize the Code of Conduct to all employee of the
company through the Task Force

Implementation of GCG:
How Do We Implement It?
• Establish Compliance Committee for Code of Conduct
• Evaluate and Review the COC Implementation regularly
• Maintain, revise and up date the Code of Conduct as a live
document

• Awareness of GCG benefit and strong commitment from
BOD and BOC
• Enforcement system and support of the whole employees
• Ability to demonstrate continuous improvements due to
GCG implementation
Implementation of GCG:
How To Make It Successful?

Part 6:
Summary and Conclusions

Summary [1]
• Management of PT. Indonesia Power has placed the GCG
implementation as part of its transformation strategy
• Management also indicates their belief that the GCG is such the
‘Soul’ without which the healthy company and the Vision can
not be achieved
• The Shareholder and Board of Commissioner have shown their
support and commitment on the implementation of GCG in PT.
Indonesia Power
• By having done the GCG Mapping and formulated the COC of
GCG, PT. Indonesia Power has already landed in the “Island of
Good Corporate Governance”

Summary [2]
• GCG Consultant concluded that: “PT Indonesia Power has
fairly practiced GCG in its operations and the overall result
of GCG of PT Indonesia Power is fair”
• PT. Indonesia Power has been in good track in its HR
Management, Financial Transparency, Environmental Concern
and Community Concern
• Referring to Industry best practices on GCG, PT Indonesia
Power still have to improve its Information Disclosure,
Effectiveness of Management Control System and Procurement
System

Summary [3]
• PT. Indonesia Power has formulated the Code of Conduct
of GCG, that agreed and supported by its Senior Managers
and the representative of its Employee Union
• The COC of PT Indonesia Power consist of General Codes
that basically contains the basic-shared values, and Specific
Codes that contains policies on the aspects of business
process, tasks, functions and procedures.
• PT. Indonesia Power is now in the stage of socializing the
COC and continues to implementing GCG and improve its
GCG practices in wider aspect of company activities

Conclusion
To conclude,
Implementing of Good Corporate Governance in PT Indonesia
Power is not anymore purely related to the Minister of SOE
decree or instruction, and the Shareholder request, but it is
becoming a belief of the Board of Directors and the
Management that shared by the employees through which the
vision of the company to be a World Class Power Company can
be successfully achieved.
Terima Kasih… Thank You
Special thanks and sincere appreciation to Dr. Sofyan A. Djalil, SH,MA,MALD.,
for his support and encouragement in preparing this presentation

Presenter Biodata
Herman Darnel Ibrahim was born in Payakumbuh, 15 April 1954.
He graduated from Electrical Engineering Department of Bandung Institute of
Technology [ITB] in 1978 and in 1979 he joined with PLN.
He got Master Degree on Electrical Power System Analyses from University of
Manchester Institute of Science and Technology [UMIST] in 1987.
He is now member of Board of Director and Senior Vice President Human
Resource of PT. Indonesia Power.
Among his previous positions are : Board of Director and Senior Vice President
of Trading and Business Development of PT. PLN PJB 1 [1998-2000], President
Director of PT. Cogindo DayaBersama [1998-1999], Manager of Corporate
Planning Division PLN PJB 1 [1996-1998], Manager of Planning PLN East Java
Distribution [1994-1996], and Manager of Operation and Maintenance PLN
Region IV Southern Sumatra [1990-1994].
Among his current activities are: Chairman of Indonesian Geothermal
Association [API], Vice Chairman of Indonesian Power Society [MKI]

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