PLN makes progress in contract renegotiations<\/p>\n
JAKARTA (JP): Cash-strapped state electricity company PT
\nPerusahaan Listrik Negara (PLN) said on Wednesday it had made
\nsignificant progress in renegotiating contracts with independent
\npower producers (IPPs).<\/p>\n
Company president Adhi Satriya said the result of the
\nrenegotiations with the first group of IPPs showed positive
\nresults.<\/p>\n
He said PLN would soon embark on other meetings to renegotiate
\ncontracts with other IPPs.<\/p>\n
\"Despite the fact that discussions are inherently complex and
\ninvolve a number of financial, legal and technical and
\noperational terms, we have made substantial progress,\" Adhi said
\nin a statement.<\/p>\n
\"We are now in a position to meet with the remaining IPPs, and
\ntoday, letters were sent in advance (regarding the) meetings.\"<\/p>\n
Adhi did not specify the names of the first group of IPPs PLN
\nhad met in the renegotiation meeting, nor the names of the IPPs
\nthe company is yet to meet with.<\/p>\n
PLN has signed power purchase agreements (PPA) with 27 IPPs,
\nbut two of them -- MidAmerican Energy Holdings and Florida Power
\n& Lights, both of the United States -- preferred settling their
\ndispute with PLN through an arbitration court.<\/p>\n
PLN has faced huge losses as a result of the economic crisis
\nwhich had been battering the country for almost two years.<\/p>\n
The sharp depreciation of the rupiah against the dollar has
\ntechnically bankrupted the company, as it sells electricity in
\nrupiah and pays most of its costs, including the power supplies
\nfrom IPPs, in U.S. dollars.<\/p>\n
PLN suffered a loss of more than Rp 9 trillion (US$1 billion)
\nlast year and received more than Rp 1 trillion in government
\nsubsidies last year.<\/p>\n
The state company has refused to buy power from IPPs and seeks
\nto lower power prices produced by IPPs.<\/p>\n
Adhi, who preferred using the term rationalization to
\nrenegotiation, said: \"To date, our rationalization team has met
\ncontinuously with numerous IPPs and is moving forward at a
\nvigorous pace.\"<\/p>\n
He did not specify the progress PLN's team had made in talks
\nwith the IPPs.<\/p>\n
Adhi reaffirmed PLN's commitment to the renegotiation program,
\nstating that PLN adopted the renegotiation measure with a defined
\nlist of objectives. These include reaching a contractual
\nstructure that is commensurate with PLN's financial resources and
\nelectricity sector restructuring goals; improving overall system
\nefficiency; meeting international standards for objectivity,
\nopenness and transparency; and maintaining Indonesia's
\nattractiveness to investors in the power sector.<\/p>\n
With the renegotiation program, PLN also wants to ensure its
\ncustomers have adequate and affordable electricity.<\/p>\n
Many IPPs have expressed willingness to renegotiate with PLN,
\nbut they expressed concern about the strong criticism launched
\nagainst them by PLN's management in the past. The IPPS said the
\ncriticisms had created misperception among the public that they
\nwere the cause of PLN's bankruptcy.<\/p>\n
The IPPs argued PLN's financial difficulty was caused by the
\nrupiah's depreciation rather than their operation, since almost
\nall of them are not yet operating.<\/p>\n
Most IPPs have also been on the receiving end of public
\ncriticism due to their partnership with former president
\nSoeharto's family and cronies.<\/p>\n
Adhi said in his statement that IPPs were not to be blamed for
\nits current financial difficulty.<\/p>\n
He said the company was forced to renegotiate the contracts
\namid the economic crisis, following the sharp depreciation of the
\nrupiah against the dollar in mid-1997.<\/p>\n
\"The (current economic) situation, plus the much lower growth
\nrate of the economy and PLN's financial difficulties creates an
\nuntenable dilemma for PLN and the government of Indonesia.<\/p>\n
\"The IPP rationalization program is a positive response to
\nthis dilemma and we are committed to pursuing a meaningful
\nsolution.\" (jsk)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/pln-makes-progress-in-contract-renegotiations-1447893297",
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