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.