Kuntoro confident of resolving PLN's problems

Kuntoro confident of resolving PLN's problems

JAKARTA (JP): Kuntoro Mangkusubroto, the new president of
state electricity company PT PLN, pledged on Wednesday to settle
the lingering disputes between the state company and independent
power producers (IPPs) and to cut the price of power supplies
from the latter.

"I am convinced that we shall be able to resolve the dispute
in a way that satisfies all parties, including PLN or the
government, the IPPs and the public," the former Minister of
Mines and Energy told reporters after being installed to the new
office in a ceremony at the State Ministry of State Enterprises.

Kuntoro said that under his leadership, in line with the
government's policy, PLN will honor all the power purchase
contracts signed with the IPPs by PLN's previous management.

He was optimistic that the IPPs would be willing to
renegotiate contractual terms, including cutting their power
prices, as they were aware that PLN could not afford the power
prices as set in the contracts due to the hardships caused by the
financial crisis.

The IPPs were also aware that PLN and the government had
goodwill to keep them from going bankrupt, Kuntoro explained.

"If other countries could get cheap power supplies, why not
us?" Kuntoro said.

When asked whether he would probe the IPPs' corrupt practices
as a form of pressure during contract negotiations, Kuntoro said:
"I will only handle the commercial aspects of the contracts. The
criminal aspects will be handled by the attorney general."

The installment ceremony was presided over by state minister
of State Enterprises Development and Investment Laksamana Sukardi
and attended by Minister of Foreign Affairs Alwi Shihab, Minister
of Mines and Energy Susilo Bambang Yudhoyono, and State Minister
of Public Works Rozik Beodioro Soetjipto.

Kuntoro was installed to replace Adhi Satriya who tendered his
resignation late last month in protest over President Abdurrahman
Wahid's handling of a dispute with PT Paiton Energy, an IPP.

Abdurrahman ordered PLN to drop the suit against Paiton,
claiming that the suit damaged the country's investment climate.

PLN filed the suit in the Central Jakarta court charging that
Paiton received its power purchase contract from PLN's previous
administration through corrupt practices.

PLN signed power purchase agreements (PPAs) with 27 IPPs,
which are mostly international power companies in partnership
with the family members and cronies of former President Soeharto.

Most of the PPAs were awarded without competitive bidding.

PLN has been seeking to renegotiate contractual terms for
about two years due to financial difficulties caused by the sharp
depreciation of the rupiah against the dollar. The power prices
set in the PPAs are quoted in dollars.

Three IPPs have filed arbitration litigation in reaction to
PLN's move.

Laksamana and Bambang said the appointment of Kuntoro
indicated the strong commitment of Abdurrahman to resolve PLN's
matters.

Laksamana said Kuntoro was charged with a special mission to
formulate and review PLN's strategic policy; to resolve all PLN's
problems, including its dispute with IPPs; and to improve PLN's
organization and finance.

Both Laksamana and Susilo said Kuntoro was the right choice to
lead PLN. Laksamana elaborated that he believed that under the
leadership of Kuntoro, who is known for his negotiating skills,
PLN would be better negotiate with IPPs.

"With Kuntoro as PLN's president, the economic ministers will
be much relieved. As such, they can concentrate on other
matters," Laksamana said.

Several analysts posited that Wahid appointed Kuntoro under
pressure from foreign countries, including the United States, as
foreign investors feel comfortable with his liberal point of
view.

Laksamana said Kuntoro would not take a liberal approach in
solving PLN's problems -- he would have to follow the guidelines
set by the interministerial team.

He also dismissed the allegation that IPPs will feel
comfortable negotiating with PLN under Kuntoro's leadership.

"In my opinion, the IPPs now tremble over the appointment of
Kuntoro as PLN's president as they know his negotiation skills,"
Laksamana said.

A controversial but respected figure, Kuntoro, a graduate of
Stanford University in the U.S, is well known as a strong and
stubborn negotiator. (jsk/03/prb)