PLN to issue bonds to fund Java projects
PLN to issue bonds to fund Java projects
Sharon Lim, Dow Jones, Singapore
Indonesia's state-owned electricity company is planning to issue bonds in the domestic market to raise between Rp 500 billion and Rp 900 billion (US$50 million and $90 million), Finance Director Parno Isworo told Dow Jones Newswires in an interview recently.
PT PLN plans to issue the bonds by June and the funds raised will be used to "inaugurate power projects, specifically in the completion of the southern transmission project in Java," where power shortfall fears loom large, Parno said in the interview.
Some of the funds from the bond issue will be used to pay for the cost of land acquisition and clearing for the southern transmission project, project management, and import taxes, he added.
Upon completion, the southern transmission line will link power generated from Paiton plants in east Java to Jakarta via Klaten and Tasikmalaya, situated on southern Java, to supplement a northern transmission routing.
The transmission network expansion will "enable larger amounts of power to be evacuated from East Java power plants to West Java," which consumes 65 percent of the Java electricity load, Parno said.
The "lifting of (power distribution) bottlenecks" will facilitate greater utilization of generating capacities in East Java, where the country's largest independent power plants are installed, he said.
Financing for the southern power routing has largely been covered by the International Bank for Reconstruction and Development, Japan Bank For International Cooperation and export credit, Parno said.
The export credit is a loan from French banks backed by a government export credit agency and is intended to promote French exports. It was given to help finance the cost of imported hardware for the project because of French engineering, construction and procurement company Alsthom S.A.'s involvement in the project, he said.
PLN has yet to determine the type of bond it will issue and other details such as maturity and coupons, although Parno did say it will "depend on the market's appetite."
PLN last issued a bond in 1997, just prior to the Asian financial crisis, when it issued Rp 600 billion in 10-year bonds.
The company has so far repaid Rp 2.5 trillion of the Rp 3.1 trillion total raised through bond issues, Parno said.
"We have up to 2007 to repay the remaining Rp 600 billion," Parno said, stressing that "even when times get rough, PLN won't default on loans."
PLN incurred sharp losses during the financial crisis as the rupiah's collapse caused an increase in the company's operating costs and debt repayment obligations, which were pegged in dollars.
But the company's financial predicament was alleviated to some extent when the Indonesian government approved a restructuring package last year to help revitalize the firm.
The company also hopes to raise its revenues from the increase in electricity tariffs over the longer term, which currently remain below the cost of production.
"PLN is committed to raising the electricity tariffs gradually to commercially viable levels," Parno said, adding that the company has "educated the Indonesian people on the tariff increase."