Energy seeks big partner amid problem

Energy seeks big partner amid problem

PERTH (Bloomberg): Energy Equity Corp., an Australian energy company, is still seeking a big partner, although it said last month it abandoned formal talks with four potential "corporate" investors.

The Perth-based company, which last month revealed that payments to its electricity generating joint venture in Indonesia are overdue, will now "proceed about its business," Chief Executive Maurice Brand told the Bloomberg Forum yesterday.

"The company is in a very strong financial position but we need to rebuild confidence in our share position and we think that'll come by attracting a corporate onto our share register," he said.

"We hope to achieve that over the near term."

The company's shares plunged 45 percent over the past month after it said payments to its PT Energy Sengkang gas and power joint venture in Indonesia were late. It also said last week it called off talks with companies that might have bought a stake in Energy Equity.

The shares recently were up 1 cent 34.5 cents from a 12- month high of A$1.62 in September.

Energy Equity still expects the Indonesian government to pay about US$5.7 million in unpaid bills from Sengkang run up by the state-owned power utility over the past three months.

"We remain confident that under our guaranteed support through the ministry of finance on behalf of the government of Indonesia that the outstanding amounts will be paid," said Brand.

PT Perusahaan Listrik Negara, better known as PLN, reduced its U.S. dollar payments to Sengkang by about 79.8 percent, the same amount of the decline in the Indonesian rupiah against the U.S. currency over the past year.

The Indonesian government last week fired the president of PLN and warned that the power utility will need Rp 117 trillion (US$9 billion) from the government in the next five years to stay afloat.

"We welcome that statement of last week and we do expect that the arrears will be paid shortly," Brand said.

Energy Equity owns 47.5 percent of the $225 million Sengkang project, a joint venture with El Paso Energy Corp. of Houston. Former president Soeharto's daughter, Siti Hardijanti Rukmana, also has a stake in the project in southern Sulawesi.

Independent power producers provide only 300 megawatts, compared with PLN's 15,000 megawatt capacity and the utility's main problem is that 30 percent of its overall costs are in U.S. dollars, said Brand.

"We know that they need to be assisted at the moment and we are happy to do that," he said. Tax reductions might allow Sengkang to reduce the amount it charges PLN, particularly in the early years of its 20-year contract, he said.

"There is not doubt in our mind that the Indonesian economy will recover fairly quickly and start to grow over the next few years and we certainly are committed there for the long term," Brand said.

Indonesia's economy is experiencing its first recession in three decades as unemployment rises and interest rates hit record highs. Annual inflation has soared to about 60 percent as the currency's value has plunged.