PLN creditors and govt to meet every 3 months

JAKARTA (JP): The government and a consortium of foreign creditors agreed on Tuesday to hold meetings every three months to discuss developments in the country's private power sector and the restructuring of state power firm PT PLN.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said the foreign creditors, who are funding Indonesia's private power sector, had expressed their concern over current conditions in the power sector.

"Meetings will be held to understand and to monitor developments of concern to private power producers in Indonesia," Purnomo said following a closed-door meeting with the foreign creditors.

He said regular meetings would be held between the creditors and PLN's restructuring team.

Purnomo is a member of the PLN team, which also includes Coordinating Minister for the Economy Rizal Ramli, Minister of Finance Prijadi Praptosuhardjo and Minister of Foreign Affairs Alwi Shihab.

Representatives from the World Bank, the Asian Development Bank, the United States' Exim Bank, Germany's Hermes and the Overseas Private Investment Corporation, among others, met with the team to discuss issues surrounding the power sector.

Some of the world's largest financial institutions have poured millions of US dollars into independent power producers (IPP) to help develop Indonesia's power sector.

In the early 1990s, PLN signed contracts for 27 power plant projects, which were backed by foreign funds, to cope with an expected surge in demand.

But the economic crisis made the projects unfeasible, with power demand dropping and PLN unable to pay for the IPPs' electricity.

The state company has since been renegotiating its contracts with the IPPs, including canceling several projects on which construction had not yet begun.

Purnomo said creditors were concerned the IPPs would be unable to repay their loans because of stalled negotiations.

And because these creditors are also important donors to Indonesia, they feel they have the right to know more, he said.

Indonesia has received billions of US dollars in soft loans from the creditors to help the country recover from the crisis.

According to analysts, much of the pressure being brought to bear on PLN during negotiations with the IPPs is coming from these financial institutions.

Economist Sri Mulyani Indrawati said during a seminar last year that Indonesia risked economic isolation if it ignored the interests of the creditors behind the IPPs.

Purnomo went on to say the creditors were aware Indonesia would need more power as demand rose. "They (creditors) know that in the near future we will need the private power companies."

PLN has warned that Indonesia may face a power shortage by 2003 if no new investments are made in the power sector.

However, the uncertain future of the existing IPPs had scared off foreign power investors, and with the current economic conditions, PLN has found that it cannot rely on either government sources or local investors for new power projects.

Purnomo said the foreign creditors were urging the government to seek an amiable solution with the IPPs. "They (the creditors) want the government to support PLN."

Since the economic crisis, PLN has faced severe financial difficulties that have prevented it from buying power from the IPPs.

The company has said it expects losses of up to Rp 20 trillion (about $2.1 billion) this year.

Subsequently, PLN has asked the government to take over some of its short-term debts, but it has not yet received a response.

"For the recovery of PLN there should be a rescue scheme from the government through a debt-to-assets swap," Purnomo said.

However, such a deal is in doubt, with Coordinating Minister for the Economy Rizal Ramli rejecting earlier any bailout by the government.

Purnomo did hint, however, that the government may reverse its position, saying that Rizal promised to study PLN's proposal.

"Rizal has asked PLN to submit the details of its financial condition immediately." (bkm)