Power contract terms reworked soon: PLN<\/p>\n
JAKARTA (JP): Cash-strapped state electricity company PT
\nPerusahaan Listrik Negara (PLN) will soon start renegotiating
\nagreements with independent power producers (IPP).<\/p>\n
PLN's president Adhi Satriya said in a statement on Monday
\nthat PLN had sent letters to the IPPs notifying them of its
\nreadiness to start renegotiating the contracts.<\/p>\n
\"Earlier today, letters were sent to the IPPs to commence
\ndiscussions. Over the next few months, we will continue meeting
\nwith IPPs and working with them to iron out mutually acceptable
\nsolutions,\" Adhi said.<\/p>\n
He said PLN's renegotiation team, made up of the company's
\nsenior officials and multi-disciplinary staff, had gathered data
\nand made analyses of the country's economic situation to estimate
\nPLN's short-term financial condition and to find resolutions that
\nwould be fair to all parties.<\/p>\n
Adhi preferred the term \"contract rationalization\" to
\n\"contract renegotiation\".<\/p>\n
PLN has power purchase agreements (PPA) with 27 IPPs but it
\ncould not fulfill its contractual obligations following the sharp
\ndepreciation of the rupiah against the dollar since mid-1997.<\/p>\n
The state company generates earnings in rupiah but has to pay
\nmost of its costs in dollars, including the purchase of power
\nsupplies from IPPs.<\/p>\n
PLN announced huge losses over the past two years and it now
\nrelies on government subsidies to survive.<\/p>\n
PLN has argued that the power prices set in the contracts are
\ntoo high and has therefore asked the IPPs to lower the prices.<\/p>\n
The IPPs, which are mostly international power companies
\ncollaborating with business people linked with former president
\nSoeharto, have expressed concerns over PLN's move, and some have
\nlodged charges against the state company at international
\narbitration courts for breach of contract.<\/p>\n
However, several IPPs have hinted that they would be ready to
\ncompromise given the financial troubles suffered by PLN in the
\neconomic crisis.<\/p>\n
Adhi said the renegotiations had several objectives, including
\na contractual structure that is commensurate with PLN's financial
\nresources and restructuring goals.<\/p>\n
It also aims at improving the overall efficiency of the
\ncountry's power industry; meeting international standards for
\ndisclosures and transparency; and maintaining Indonesia's
\nattractiveness to investors in the power sector.<\/p>\n
Adhi said PLN had always considered a fair resolution of its
\ncontracts with IPPs as a top priority.<\/p>\n
\"While PLN needs to assure that its customers have adequate
\nand affordable electricity, PLN also understands that IPPs need
\nlegal certainty and predictability,\" Adhi said.<\/p>\n
He said PLN would duly explain the planned contract
\nrationalization process to multinational institutions, including
\nthe Asian Development Bank (ADB), the World Bank, and the U.S.
\nstate-owned Overseas Private Insurance Corp (OPIC). (jsk)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/power-contract-terms-reworked-soon-pln-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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