PLN to follow rules in renegotiation with private firm

PLN to follow rules in renegotiation with private firm

JAKARTA (JP): Minister of Mines and Energy I.B. Sudjana
promised yesterday that state-owned electricity company PLN would
follow rules in its bid to renegotiate with private power
companies over prices.

Sudjana said PLN would not force private power companies to
reduce power prices, but tell them that the company could no
longer afford private power at prices settled in U.S. dollars
before the monetary crisis beset the region.

"It's up to private power companies whether to reject the
proposal," Sudjana said after opening the Blue Sky Seminar on the
use of environmentally friendly gas technology.

He said the ministry would not interfere with negotiations,
but gave full freedom to PLN to deal with private power companies
in a business-like way.

PLN president Djiteng Marsudi said Tuesday that PLN would not
be able to purchase private power at prices settled in power
purchase agreements following the sharp depreciation of the
rupiah against the dollar.

PLN has to buy private power in dollars, while PLN's earnings
are in rupiah.

PLN has 29 power purchase agreements which were signed before
the monetary crisis affected the region, while the rupiah has
lost 32 percent of its value since July, closing at Rp 3,550
yesterday.

Private power companies set prices ranging from 5.74 U.S.
cents to 8.46 cents per kilowatt hour (kWh) for coal-fired power.

"PLN will go bankrupt if it has to buy power at such prices in
the future," Djiteng said.

Some private power was scheduled to go on-line next year,
including a 1,230-megawatt (MW) coal-fired power plant owned by
PT Paiton Energy Co in Paiton, Probolinggo, East Java, and a 135-
MW combined cycle power plant in South Sulawesi, owned by PT
Energi Sengkang.

Observers say PLN has to raise power prices by more than 32
percent starting next year from the current average price of Rp
165 per kWh to pay for the cost of private power.

Djiteng said PLN had started renegotiating with private power
companies to follow up on Sudjana's order.

However, he did not specify the new pricing scheme proposed by
the company or which companies PLN was negotiating with.

The secretary-general of the Ministry of Mines and Energy,
Darmoko Slamet, said separately yesterday that there was not any
new pricing scheme proposed by PLN yet as the rupiah was still
fluctuating. (jsk)