Pertamina admits facing cash flow problems

Pertamina admits facing cash flow problems

JAKARTA (JP): The president of state oil and gas company
Pertamina admitted yesterday that importing fuel and crude oil
for its refineries was causing the company cash flow problems
because of the sharp depreciation in the value of the rupiah
against the U.S. dollar.

He said that the recent fall in the value of the rupiah had
significantly increased the subsidy required to keep fuel prices
constant in rupiah terms.

"The problem has arisen because Pertamina has not been
reimbursed by the government for the fuel subsidies it has spent
for the past two months," Soegianto said after a ceremony to hand
over a Rp 1.9 billion (US$190,000) donation to cooperatives owned
by students from 28 universities throughout Java.

He refused to reveal the size of the outstanding subsidy
payments owed by the government, but analysts put them in the
region of Rp 1.6 trillion. The 1998/1999 state budget allocates
Rp 9.5 trillion for fuel subsidies in the current fiscal year.

"It should be noted that the subsidy is not for Pertamina but
for fuel consumers," Soegianto said, adding that the company, as
the sole distributor of fuel oils, had used its own money to pay
for recent fuel and crude oil imports in full.

He said that Pertamina earned Rp 2.2 trillion from the sale of
fuel each month but had to spend Rp 3 trillion to import fuel and
crude oil to feed its refineries.

Although Indonesia is a net oil exporter, it has to import
between 15 and 20 percent of its annual fuel consumption of 52
million kiloliters and 70 million barrels of crude oil to feed
its refineries.

Soegianto said the company's cashflow problem had been
exacerbated by the failure of some large private clients,
including the recently bankrupted private air carrier PT Sempati
Air, to pay their debts.

Sempati, which is owned by former president Soeharto's
youngest son Hutomo Mandala Putra and Soeharto's crony Mohammad
"Bob" Hasan, owes Pertamina Rp 50 billion in unpaid aviation fuel
bills.

"We are now trying to collect the credit arrears," Soegianto
said.

Separately, Minister of Mines and Energy Kuntoro Mangkusubroto
confirmed yesterday that Pertamina was facing financial
difficulties.

"I would be lying if I said that the company was not having
cash flow problems," he said.

Kuntoro said he had discussed the problem with Minister of
Finance Bambang Subianto, who said Pertamina had not been
reimbursed because the Development and Finance Control Board
(BPKP) had yet to finish an audit of the company.

"You have to understand that bureaucracy cannot always work
speedily," Kuntoro said.

Kuntoro hinted that the delay in reimbursement by the Ministry
of Finance may also be linked to the further plunge in the value
of the rupiah against the U.S. dollar. Any weakening in the
national currency causes the fuel subsidy to rise sharply in
rupiah terms.

He said the Rp 9.5 trillion allocated by the government in the
state budget was based on a projected crude oil price of US$14.5
per barrel and an exchange rate of Rp 6,000 per dollar throughout
the current fiscal year.

The exchange rate has so far averaged more than Rp 10,000 per
dollar this year.

"The fuel subsidy increases by Rp 5 trillion every time the
exchange rate declines by Rp 1,000 against the dollar," he said.

Soegianto added that Pertamina also faced difficulty securing
imports because most Indonesian letters of credit (L/Cs) were
rejected overseas.

He said even L/Cs issued by state banks were being rejected
overseas.

"If L/Cs issued by state banks are turned down then we have to
open our L/Cs through foreign banks," Soegianto said. (jsk)