PLN renegotiates deals with IPPs
PLN renegotiates deals with IPPs
JAKARTA (JP): President of state electricity company PT PLN
Adhi Satriya said on Tuesday renegotiations would soon get
underway with independent power producers (IPP) on power purchase
agreements.
"We have sent letters calling on the IPPs to prepare for the
renegotiations. We've even invited one of them -- the owner of
the Sengkang gas-fired combined cycle power plant -- for the
renegotiation later this month," Adhi said on the sidelines of a
hearing with House of Representatives' Commission V with
authority including mines and energy.
"Thus, the renegotiation has technically started."
The 135-megawatt Sengkang power plant located in South
Sulawesi is owned by PT Energy Sengkang, a joint venture of
America's EL Paso, Australia's Energy Equity and Triharsa Sarana
Jaya Purnama.
Sengkang came on stream in late 1997, the first to operate of
the 27 IPPs with agreements with PLN.
Adhi said his firm prioritized renegotiating with 10 of the
firms which had either started or completed physical construction
of their projects.
They include the coal-fired Paiton I and Paiton II power
plants, both in Probolinggo, East Java; the Drajat geothermal
power plant in West Java; the Salak geothermal power plant in
West Java; the Tanjung Jati B coal-fired power plant in Central
Java, and the Pare-Pare diesel power plant in South Sulawesi.
PLN is seeking renegotiation of the contracts to ease its
financial burden amid the monetary crisis. The rupiah's sharp
depreciation against the dollar has severely affected the firm's
financial performance since it obtains revenues in the rupiah but
pays most costs, including for power supplies from the IPPs, in
the dollar.
In the renegotiation, Adhi said, PLN would ask the firms to
reschedule their power projects in line with national demand,
review prices in accordance with international prices and also
reexamine contractual terms to provide mutual benefit.
Adhi said he would head the team of negotiators along with the
firm's planning director Hardiv Situmeang.
They will be supported by national and international advisors
on financial and legal matters.
Adhi estimated the renegotiation would take two years and
could cost PLN US$10 million.
Price hike
PLN has also requested government permission to raise its
power prices by 18 percent starting from October to help its
financial recovery, Adhi said.
He said the government was still considering the proposal.
"The rise in power prices would enable PLN to reach a set
financial target and ease its financial burden."
A government rejection would force the firm to continue its
dependence on government subsidization of its operation. The
government would also be required to help the company restructure
its Rp 31.8 trillion ($3.61 billion) debt.
According to PLN's financial director Parno Isworo, the
government would need to increase its subsidy to Rp 3.5 trillion
this year from Rp 1.3 trillion last year if a price hike was
denied.
Adhi said PLN projected its net loss to decrease to Rp 1.728
trillion this year from the 1998 figure of Rp 7.215 trillion.
He did not mention whether the projected decrease in the loss
for this year was contingent on the power price increase.
He said PLN's operating income was projected to increase by
20.5 percent to Rp 16.371 trillion this year from Rp 13.581
trillion in 1998.
Payment for power supplies from IPPs was projected to drop to
1.178 trillion this year, from Rp 2.539 trillion.
Payment for fuel was projected to increase to Rp 9.218
trillion from Rp 7.931 trillion last year. (jsk)