PLN pays for power at below agreed rates

JAKARTA (JP): The state electricity company PLN has continued to buy power from private companies at a rate of Rp 2,450 per dollar despite agreements to pay according to current exchange rates.

Company president Djiteng Marsudi said Monday that PLN's unilateral move to pay for privately generated power at the pre- crisis exchange rate has infuriated independent power producers (IPPs) who accuse PLN of breaking their power purchase agreements (PPAs).

"I tell them they may be angry, protest or whatever. Still, PLN doesn't have enough money to pay for their power at the actual currency rate in line with the PPA," Djiteng said on the sidelines of a hearing with the House of Representatives Commission V for industry, mining, trade, manpower, cooperatives and the environment.

PLN's purchase agreements with IPPs stipulate that the company buy its power in U.S. dollars.

The rupiah's exchange rate with the greenback has ranged between 7,000 and 17,000 recently, compared to the rate of 2,450 last July before the monetary crisis hit the country.

"I have asked them (IPPs) to renegotiate on the power prices set in the PPAs since PLN can't afford them any longer due to the monetary crisis. But they have refused to renegotiate the prices," Djiteng said.

"So we have taken the measure of setting a currency exchange rate of Rp 2,450 per dollar for the payment of their power," he said.

The rupiah's depreciation has severely affected PLN as the company sells power in rupiah.

PLN has signed purchase agreements with 26 IPPs, but only two of the private companies have facilities that have started operations -- the 135-megawatt (MW) Sengkang combined cycle power plant in South Sulawesi and the 165-MW Salak geothermal power plant in West Java.

PLN also buys power in dollars from the Cikarang Listrindo power plant in West Java, owned by tycoon Sudwikatmono. The plant was originally designated to serve surrounding industries but was allowed to sell power to PLN as an IPP from 1996.

Under its purchase agreements, PLN must buy power from the IPPs at between 5.74 cents and 8.4 cents per kilowatt-hour (Kwh). Currently, PLN's average selling price is Rp 170 (1.7 cents) per kwh.

PLN suffered Rp 334 billion in losses during the second half of last year. It projects a Rp 1.3 trillion loss this year.

The government has directed PLN to renegotiate new price rates with the IPPs to prevent the company from going bankrupt.

However, PLN's attempts to renegotiate its prices have yet to bear fruit.

Djiteng said PLN was ready to accept the consequences of its move to set the rupiah rate at 2,450 for its payments, including the possibility that IPPs sue it in the international court.

"I'm ready to face them even in court," Djiteng said.

Members of House Commission V voiced support for PLN's move, saying the current monetary crisis had created extreme difficulties for PLN and it had the right to renegotiate for lower rates.

"Commission V concludes that the current monetary crisis is a force majeure that has turned all of the PPAs signed by PLN into agreements that can no longer be followed," said commission head Marzuki Achmad. (jsk)