Government may bail out debt ridden electricity firm

BANDUNG, West Java (JP): The government said it might approve a request by state electricity company PT PLN to pay its debts totaling Rp 12 trillion (about US$1.34 billion) with independent power producers (IPPs).

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said in Bandung the government was likely to pay PLN's debts considering its importance in safeguarding national power supply.

"Well PLN is a state company, so if the company is sick the government is sick too," Purnomo told reporters on the sidelines of a seminar on electricity on Saturday.

He said that PLN's request was still being discussed by finance minister Prijadi Praptosuhardjo and the state electricity company.

However, he said he could not guarantee that the government would approve PLN's bailout request.

"It's up to the finance minister," he added.

Technically, he went on, PLN needed large investments to build new power infrastructure and prevent a power crisis.

The state company has said that if power demand continues to grow by its present pace of 12 percent a year, Java might face a power shortage in 2003.

Purnomo said he had given PLN and the ministry's director general for electricity two months to come up with a plan to avoid a power crisis.

"The plan will be included in the national general plan on electricity, which will have to be completed by January 2001," he explained.

Over the years, PLN has failed to pay for electricity it purchased from IPPs.

PLN buys power from IPPs at an average price of 6 U.S. cents (about Rp 540) per kilowatt per hour (kWh), but sells it at an average of Rp 240 per kWh.

In the first half of this year, PLN recorded a net revenue of Rp 10.11 trillion, up 30 percent from the same period last year, mainly because the government approved raising electricity rates by an average of 29 percent since April.

But during the same period, the state company recorded a twelvefold increase in losses to Rp 11.58 trillion as against last year's first semester loss of Rp 974 billion.

PLN attributed the losses largely to the costs of purchasing IPPs' power, the price of which had quadrupled during the first half of the year due to a fluctuating rupiah.

Hatta Radjasa of House of Representatives Commission VIII for energy affairs said the government could not afford to let PLN go bankrupt.

"I don't agree or disagree (with the bailout), but PLN has short-term and long-term liabilities that it cannot pay," he said. (bkm/25)