Minister pledges end to PLN row with contractors
JAKARTA (JP): Minister of Mines and Energy Kuntoro Mangkusubroto has assured that state electricity company PLN will soon settle its dispute with its gas contractors, including PT Arco Indonesia, over gas payments soon.
But PLN might take longer to settle its disputes with independent power producers (IPPs) due to the complexity of the issues being negotiated, he said.
"PLN and the gas contractors might reach a final solution to their dispute in one or two weeks. But the state company might take at least six months to settle its disputes with the IPPs since they are more complex in nature," Kuntoro was quoted by Antara as saying here Wednesday.
PLN is in dispute with gas producers over gas payments, while it is disputing power payments and other contract terms with independent power producers, Kuntoro said.
PLN announced early this year that it could not buy its gas and power under the current exchange rate and unilaterally set the pre-crisis exchange rate of Rp 2,450 per dollar as the basis of payment.
The monetary crisis put the company into financial difficulty because it bills in rupiah, but buys gas and power in dollars.
Aside from refusing to buy power at the current exchange rate, PLN also asked for changes in its power purchase agreements with independent power producers.
PLN has thus far signed 26 power purchase agreements.
The company claims that independent power producers set high prices and require PLN to buy too high a volume of power.
Under the contracts, PLN has to buy 80 percent of independent power producers' power generating capacity for between US$5.70 and $8.40 per kilowatt hour (kwh).
PLN has called on independent power producers to lower their prices and the required volume of power its has to buy.
Gas
The government has helped PLN fulfill its obligation to gas and power contractors by giving the company a subsidy of Rp 1.3 trillion (about US$173 million) to pay its debt arrears.
But the money was only enough to cover PLN's gas and power payments for three months until last month.
The government said it would not extend further subsidies to the company, and instead advised PLN to negotiate gas and power payments for the following months with its contractors.
Kuntoro said PLN had proposed to buy gas from contractors at an exchange rate of Rp 2,450 to the dollar in the second quarter of the year, and at the half the current exchange rate in the third quarter.
PLN would pay its debt arrears plus interest in the future, he said.
Meanwhile, Dow Jones quoted yesterday an anonymous source with a major gas supplier as confirming that talks were currently being held between gas contractors, PLN and government officials.
The source said that while gas suppliers in principle had agreed to accept partial payments from PLN, the talks quickly become mired in dispute over the amount of future compensation and, more specifically, interest on delayed payments.
"What we think is low, they think is high -- there's a difference of opinion there," the source said.
Gas is supplied by several offshore producers operating under production sharing contracts, including local units of Atlantic Richfield Co. and Unocal Corp. of the U.S. and U.K-based British Petroleum Co. PLC.
He said there was some hope that the talks would see a speedy resolution.
"I think there is genuine pressure from Kuntoro's office to find a solution, so they can present it to the World Bank," the official said.
The World Bank has delayed loans needed by PLN to upgrade its rural electrification and transmission system until the utility improves its finances. (jsk)