Pertamina threatens to cut off fuel to PLN cver debt

Fabiola Desy Unidjaja, The Jakarta Post, Jakarta

State-owned oil and gas company Pertamina has vowed to get tough with debtors, and threatened to cut the fuel supply to state- owned electricity company PT Perusahaan Listrik Negara (PLN).

PLN owes its fellow giant state company a whopping Rp 2 trillion (US$215.82 million), and a fuel cut could mean massive blackouts.

Saying that the outstanding debts had begun to disrupt its cash flow, Pertamina said on Monday that it could not tolerate late payments by other institutions any more.

"This is just a warning. We will cut the fuel supply next month if PLN fails to pay its bills," Pertamina finance director Alfred Rohimone warned during a hearing with the House of Representatives' Commission XI on financial and banking affairs.

He added that Pertamina was fully aware that once it cut the fuel supply to PLN, it would cause massive blackouts nationwide.

"This is only a warning. We have sent a letter on this matter to PLN," he added.

PLN has accumulated the Rp 2 trillion debt to Pertamina over the last few years. In 2000, it owed a total of Rp 6 trillion to the oil firm, but that debt was eventually paid back.

Alfred did not say when PLN stopped paying its bills to Pertamina.

A regular fuel supply to PLN, particularly for the 6,377 generators that use fuel oil or diesel fuel is crucial -- that represents 25 percent of the 25,218 power plants across the country -- as they are mostly on Java and Bali islands. The remaining 75 percent of the plants use natural gas, coal or geothermal power.

PLN requires some nine million kiloliters of fuel per year for the power plants.

The government has been trying to build more power plants using alternative energy sources due to the limited oil reserves and high prices in recent years.

Aside from PLN, Pertamina is also seeking support from the House to collect its debts from the government and the Indonesian Military (TNI).

The TNI owes Pertamina Rp 900 billion.

The government also has a Rp 2.1 trillion outstanding debt to Pertamina.

Up to 2003, Pertamina was actually a government agency, which had an obligation to distribute fuel to the public and other state agencies.

Since the state firm had its status changed to a limited company, the government was required to pay Pertamina for all fuel received.

"This year, we intend to separate our public service obligation with the upstream business in a bid to generate more profit," Pertamina president director Widya Purnama told the hearing.