Harvard Group to help PLN<\/p>\n
JAKARTA (JP): State-owned electricity company PT PLN has
\nappointed Harvard Negotiation Group to assist the troubled
\ncompany in renegotiating its contracts with 26 independent power
\nproducers (IPP), mostly controlled by foreign electricity giants.<\/p>\n
A deputy of the state minister for the empowerment of state
\nenterprises, Sofyan Djalil, said yesterday the U.S. consultants
\nwould boost the negotiation skills of PLN's restructuring team of
\neight.<\/p>\n
He added that PLN had also appointed an international
\nlitigation counsel to help in the renegotiation process.<\/p>\n
\"The contract renegotiation will be the highest priority of
\nPLN's new president,\" said Darwin Silalahi, a senior official at
\nthe state minister's office.<\/p>\n
The government appointed Adhi Satriya as PLN's new president
\nyesterday, replacing the outspoken Djiteng Marsudi. Five other
\ndirectors were also removed.<\/p>\n
PLN signed contracts with the 26 IPPs between 1995 and 1997 to
\npurchase 11,000 MW at U.S. dollar rates.<\/p>\n
But the sharp depreciation of the rupiah in the past year left
\nPLN with no hope of fulfilling the contracts.<\/p>\n
In June, Djiteng sent shock waves through the sector by
\nunilaterally canceling PLN's contract with PT Cikarang Listrindo
\nand threatening to follow suit with the other IPPs.<\/p>\n
Many of his superiors were reportedly displeased by the move
\nand his frankness in revealing that many contracts were granted
\ndue to influence peddling during the presidency of Soeharto.<\/p>\n
\"Such a move is popular in the eyes of the people, but this
\nwill kill ourselves,\" Sofyan said, stating that unilateral
\ncancellation of the contracts would leave the country with
\ndifficulties from unresolved matters with 70 international banks
\ncommitted to the projects, international litigation lawyers and
\noverseas exim banks.<\/p>\n
Renegotiation in light of the country's financial woes would
\nbe the best approach, he said.<\/p>\n
\"We'll just have to show that our wallet is empty.\" He
\nbelieved foreign electricity giants would take into account PLN's
\ndifficulties because they had long-term business plans in the
\ncountry.<\/p>\n
Sofyan said the Harvard consultants would set out to minimize
\nPLN's burden from the power purchasing contracts.<\/p>\n
He explained that of the 26 IPPs, only seven had completed
\ntheir power generating facilities, 12 companies might not be able
\nto start the projects because due to lack of financing and seven
\nothers had made financial closing but had not started their
\nprojects.<\/p>\n
Sofyan said Thursday the negotiation team would renegotiate
\nwith the first group of seven IPPs to formulate a new power
\npurchasing payment system feasible for PLN and the government.<\/p>\n
Temporary project termination would be an option for the other
\nIPPs through providing them with a reasonable compensation fee,
\nhe added.<\/p>\n
PLN is projected to suffer a record loss of Rp 14.7 trillion
\nthis year, and larger losses over the next couple of years due to
\nthe rupiah's fall. The company will go bankrupt if the government
\nfails to provide a massive Rp 117 trillion in subsidies in the
\nnext four years.<\/p>\n
Restructuring the company, including renegotiating the IPP
\ncontracts, was a must to prevent bankruptcy, Sofyan said.<\/p>\n
Electricity tariff<\/p>\n
Separately yesterday, Minister of Mines and Energy Kuntoro
\nMangkusubroto said he was unsure whether to delay the 18 percent
\nincrease in electricity tariffs in August following pressure from
\nvarious groups.<\/p>\n
\"This is the President's (B.J. Habibie) decision and it should
\nbe implemented ... However, it is up to PLN whether to delay the
\nincrease,\" he said.<\/p>\n
The government in May increased the tariff by 20 percent, but
\nthe hike for small household customers was canceled in June after
\nwidespread complaints of the inaccurate billing system.<\/p>\n
Kuntoro said the minister of communications had also asked for
\na cheaper electricity tariff for the state-owned train company
\nPerumka.<\/p>\n
The minister of trade and industry requested a lower tariff
\nfor steel companies, he said.<\/p>\n
\"We still have to see whether we can fulfill these requests.\"<\/p>\n
The government in May decided to also increase electricity
\ntariffs by about 18 percent in November to reduce the state
\nsubsidy, which is earmarked at Rp 8.2 trillion in the 1998\/1999
\nState Budget.<\/p>\n
Darwin said separately that if the government decided to
\nincrease the tariff in August, the budget subsidy would be
\nlowered to Rp 5.7 trillion. (rei)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/harvard-group-to-help-pln-1447893297",
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