PLN to seek massive loans for expansion

Moch. N. Kurniawan, The Jakarta Post, Jakarta

The state-owned electricity company PLN said on Tuesday it was planning to seek foreign loans of between Rp 99 trillion (US$9.5 billion) and Rp 141 trillion until 2005 to finance expansion programs aimed at meeting growing power demands in the country.

PLN president Eddie Widiono said that PLN would use the loans to finance the development of at least 47 power generating units and 14 transmission lines across the country.

"The funds will be enough for us to maintain our power supply to meet future growing demand," he told a press conference following a meeting with senior economic ministers.

He added PLN had made loan proposals to several foreign financial institutions including from Japan, Denmark, Belgium and Germany.

He didn't provide the names of the institutions.

According to him, the country's power demand would grow by an average of at least 3.4 percent per year until 2005.

But he said the power demand might grow by 3.8 percent for Java and Bali, and 4.4 percent for other areas, should the country's economy grow better than expected.

"In this case, we need Rp 141 trillion to meet the demand," he added.

PLN has said that 24 critical systems outside the Java-Bali grid in 2002 will experience power shortages because of insufficient funds.

It also said that Java and Bali would experience power shortages in 2004 due to the lack of generating capacity and rising demand.

At present, PLN's generating capacity stands at 18,600 megawatts (MW), while demand at the current peak reaches 17,000 MW.

It added the state utility did not have the financial ability to build new generating units to match the country's future power demands.

Elsewhere, Eddie said that PLN's net loss declined to Rp 1.8 trillion in 2001 from Rp 24.6 trillion in 2000.

He said the government's decision to write off Rp 20.8 trillion of PLN's debt helped improve the company's bottom line.

In addition, an average 17.47 percent increase in electricity prices last year, and successful deals in reducing power rates with several independent power producers had also helped PLN minimize its losses, he said.

PLN expected its loss to further drop to Rp 200 billion this year, he added.

The rupiah's sharp fall against the dollar following the 1997 Asian currency crisis had badly affected PLN's bottom line. This is because it sells electricity in rupiah, but most of its operating costs are in U.S. dollars.