Govt pledges to honors power purchase deals
Govt pledges to honors power purchase deals
JAKARTA (JP): The government has pledged that it will honor
power purchase contracts between state electricity company PT
Perusahaan Listrik Negara (PLN) and independent power producers
(IPPs).
In making the pledge yesterday, Minister of Mines and Energy
I.B. Sudjana said the IPPs should take into account PLN's
difficulties in fulfilling the terms of the contracts given the
sharp appreciation of the U.S. dollar over the past several
months.
"In principle, we never want to make investors suffer losses.
We shall never break the power purchase agreements we have
signed," Sudjana told The Jakarta Post
Sudjana said a team consisting of officials from several
ministries was working to solve a dispute between PLN and its
private partners regarding power prices.
"But I hope, and I believe, the investors can understand the
financial problems which have made PLN unable to fully pay for
their power," Sudjana said.
"The government is now looking for a solution which will at
least prevent investors from suffering losses and make them still
able to operate," said Sudjana.
He could not provide any details on such a solution.
PLN buys power from IPPs in U.S. dollar rates from between
5.74 cents and 8.4 cents (Rp 460 and Rp 670) per kilowatt-hour
(kwh) while it sells the power to the public at an average of Rp
170 per kwh.
PLN has reportedly refused to buy power from the IPPs at the
existing currency rate due to financial problems caused by the
crisis. Instead it continues to pay according to the pre-crisis
exchange rate of Rp 2,450 per dollar.
"PLN doesn't have enough money to pay for the IPPs' power at
the current rate," PLN president Djiteng Marsudi said at a
hearing with the House of Representatives last week.
He said the company suffered a loss of Rp 334 billion in the
second half of last year and has projected a Rp 1.3 trillion loss
this year.
Director General of Electricity and Energy Development Endro
Utomo Notodisuryo said the government would probably provide PLN
with financial assistance to meet its obligations to the private
power companies.
"But I don't like to name it a subsidy. The word is not nice
to hear right now," Endro said.
PLN has also been buying gas for its power plants at the old
conversion rate, said Endro.
Endro said PLN's refusal to pay at current currency rates has
infuriated electricity and gas contractors, adding that at least
two companies -- Unocal Geothermal of Indonesia, which owns the
Salak geothermal power plant in West Java, and Arco, which sells
gas to PLN -- have filed complaints over PLN's move.
They accused PLN of breaking its contracts which require PLN
to pay for power and gas at current currency rates.
PLN has signed power purchase agreements with 26 IPPs. Only
two of them -- the Sengkang combined cycle power plant in South
Sulawesi and the Salak geothermal power plant in West Java --
have started selling power to PLN.
PLN has tried to renegotiate with the IPPs on the pricing
scheme over several months, but its efforts have been
unsuccessful.
Endro said the government team would work with PLN and the
private power companies to determine power prices acceptable to
both of them.
If the IPPs insist on a price level too high for PLN, the
government will temporarily help PLN with additional funds to pay
for the power, Endro said.
"The principle is that the government won't let PLN and its
contractors stop operations. But both parties, as business
partners, are expected to be willing to share the financial
burden resulting from the economic crisis," Endro said. (jsk)