PLN complete renegotiation with 20 IPPs
A'an Suryana, The Jakarta Post, Jakarta
Financially-troubled state electricity firm PT PLN has completed contract renegotiations with 20 independent power producers (IPPs), saying the deals will help ease its financial burden.
The company also expected to complete the renegotiations of seven other remaining contracts in the middle of this year, said Juanda Nugraha, the head of the firm's renegotiation team.
"The completion of the renegotiations will have a double impact. On one hand, it will ease PLN's financial troubles. On the other hand, it will help restore the country's reputation among power investors," he told The Jakarta Post.
He said all 20 IPPs had agreed to cut their power price to below 5 US cents per kilowatt hour (kWh), which is lower than PLN's current selling price of Rp 488 (5.42 cents) per kWh.
Juanda said the six remaining contracts involved Wayang Windu, Sarulla, Kamojang, Bedugul, Karaha Bodas, Dieng and Patuha power plants. All are geothermal power projects.
PLN has been operating at a loss since the monetary crisis hit in 1997. The sharp plunge of the rupiah against the green back cost the firm dearly, because the company must purchase power from the IPPs in U.S. dollars under the contract, while it sells the power to the public in rupiah.
Last year, PLN booked financial losses of around Rp 4.47 trillion.
Under the take-or-pay clause of the contracts with the IPPs, PLN has to pay the IPPs for the amount of power set in the contract, even if the state firm does not take the power supplies.
The government suspended and reviewed most of the power projects in 1997 and urged PLN to renegotiate the contracts. This led to long disputes between PLN and the IPPs.
The government allowed the projects to resume last year amid fears of a looming power crisis.
Juanda said the latest contracts renegotiated by PLN pertained to the Asahan hydropower plant, the Sibayak geothermal power plant and the Cibuni geothermal power plant.
"The contracts were successfully renegotiated in December last year."
The renegotiation outcomes have been lodged with the government for approval, he said.
He said the owner of the Asahan project agreed to drop its price to 4.6 cents per kWh, from 7 cents under the old contract, while the owners of the Sibayak and Cibuni power projects had agreed to cut is prices to 4.7 cents from 7 cents and to 4.45 cents from 7 cents respectively.
Juanda said successful renegotiations would allow PLN to save up to US$5 billion, but he did not provide reasons to justify his claim.
Analysts said the IPPs had agreed to cut their prices in return for compensation from PLN, including an extension of the contract period. Under the old contracts, PLN was obliged to buy power from them for 30 years, but under the renegotiated contracts, the contract period had been extended up to 50 years.
This means the contract renegotiations won't reduce PLN's financial obligations to the IPPs, but will only allow PLN to pay the IPPs over a longer period.
List of projects whose contracts have been renegotiated
1. Paiton I, 2. Tanjung Jati B, 3. Paiton II, 4. Sengkang, 5. Sibolga A, 6. Amurang, 7. Palembang Timur, 8. Jawa Barat (Cilegon), 9. Pare-Pare (Suppa), 10. Pasuruan, 11. Cilacap, 12. Asahan, 13. Tanjung Jati A, 14. Tanjung Jati C, 15. Serang, 16. Salak, 17. Drajat, 18. Sibayak, 19. Cibuni, 20. Cikarang