PLN plans bonds early next year

PLN plans bonds early next year

Dow Jones, Jakarta

Indonesia's state-owned electricity company PT Perusahaan Listrik Negara, or PLN, said Tuesday it plans to issue bonds early next year to fund an expansion of its electricity network after large parts of the country suffered blackouts this year.

PLN will issue up to Rp 900 billion in bonds in the first quarter of 2003, Jusuf Hamdani, a senior PLN official told Dow Jones Newswires.

Indonesia's government is also hoping to persuade foreign investors to buy separate dollar bonds to help with building more power stations and improve the distribution network.

Although any issue from PLN will carry a quasi-sovereign guarantee of repayment, foreign investors are likely to demand high yields to invest in Indonesia at the moment.

The Oct. 12 bomb blasts in Bali added to already rising concerns about the investment climate here. Security issues, rampant corruption in the courts and rising labor costs are pushing foreign investors to leave Indonesia for other countries in the region, especially China.

Raising debt is crucial for the cash-strapped government if it wants to head off an impending energy crisis, experts say.

The country's electricity generating capacity is expected to fall short of demand by 2005 unless PLN increases capacity, and scales back growing demand.

Jakarta is especially vulnerable to power shortages. In September, much of the city was plunged into darkness for five hours after a break in a transmission line from a nearby power station.

Currently, the main island of Java's grid has reliable capacity of around only 16,200 megawatts, with peak demand often breaching the 14,000-megawatt level in the early evening.

Experts believe the country will need 2,300 megawatts in extra power before 2005 to head off a crisis.