PLN fears shortfall despite cash infusion
PLN fears shortfall despite cash infusion
HONG KONG (Dow Jones): Indonesia's state-owned electric utility PT Perusahaan Listrik Negara (PLN) remains gravely concerned that it won't be able to make payments for gas and power supplies after March, despite a cash infusion this week of Rp 1.25 trillion, a utility official told Dow Jones Newswires yesterday.
PLN on Tuesday signed loan papers for a fresh injection from Indonesia's Ministry of Finance (MOF) to help the cash-strapped utility meet payment obligations, but only for obligations incurred through the first quarter, the official said.
The ministry MOF has indicated that after March, PLN will have to use its own funds or find another way to meet its obligations.
'The government of Indonesia has provided us with three months' financial assistance,' the PLN official said. 'Whether they will be able to support us for the next month, we still are not so sure.'
The finance ministry's move was prompted by PLN's announcement in February that it was unable to meet dollar-denominated obligations at current dollar exchange rates for natural gas supplies and electricity generated by independent power producers, or IPPs. Instead, PLN said it would make payments based on an exchange rate of Rp 2,450 to the U.S. dollar.
The PLN official confirmed that Unocal Corp. (UCL) of the U.S., which operates the Dayabumi geothermal power plant in Java through a local joint venture, will receive payment this week for December electricity that will be adjusted to reflect the market exchange rate.
Moreover, Arco Indonesia Inc., a unit of Atlantic Richfield Co. (ARC) of the U.S., will receive a payment due for fourth- quarter gas supplies, the official confirmed.
An official in Arco's finance department said the company was near agreement on payment with PLN. Total payment for gas supplied by Arco's concession in December was $3.2 million for three customers. Besides PLN, Arco also supplies gas to Perusahaan Gas Negara and a fertilizer affiliate of national oil company Pertamina.
PLN, Indonesia's monopoly electricity supplier, is creaking under the weight of $75 million in monthly obligations, with the bulk going to pay for the gas supplies and to IPPs.
Despite repeated urgings by PLN, the Indonesian government has refused to raise electricity rates paid by consumers since 1994.
Even before the rupiah's plunge, the government would have had to have raised rates by 40 percent to bring the utility to reach a World Bank-set financial target of 8 percent profitability, the official
A tariff hike scheduled for April 1 will be critical to help restore PLN's financial health, the PLN official added.
Until tariffs are raised, however, the World Bank, a major lender to PLN, is withholding approximately $260 million, the official confirmed. PLN has about $3 billion in outstanding debt to the World Bank.
PLN's Endang confirmed that the World Bank had withheld the loans pending a tariff hike, but couldn't provide further details.
The loans now withheld were slated for use in the construction of new transmission lines to hook up three new IPPs coming on line in the next two years.
The World Bank has recognized PLN's dire straits, and has agreed to allow the utility to draw on about $300 million in unused monies from existing loans, the PLN official said, allowing the utility to maintain and expand the country's critical electricity supply.