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)