PLN told to honor contracts

PLN told to honor contracts

JAKARTA (JP): Minister of Mines and Energy Kuntoro
Mangkusubroto is trying to find a solution to the payment dispute
between the state electricity company, PT PLN, and its gas and
power contractors.

Kuntoro told reporters over the weekend that he had ordered
PLN to continue negotiating with the gas producers and the
Independent Power Producers (IPP) over the payment for the gas
and power supplied to PLN.

The negotiations were underway, he said.

Kuntoro asked PLN in the negotiations to honor its contracts
with the gas producers and IPPs, saying "the contracts are
sacred."

But contractors were also expected to realize PLN's current
difficulties to fulfill the contractual terms, including the
terms of payment, he said.

Kuntoro proposed a payment formula under which PLN could pay
its debt to the gas producers and IPPs in installments but he did
not elaborate.

PLN has claimed that it cannot fully pay its gas and power
suppliers at present following the rupiah's sharp depreciation
against the dollar. PLN gets revenues in rupiah but it has to buy
its gas and power in U.S. dollars.

PLN says it is only ready to buy the gas and power at the
precrisis exchange rate of Rp 2,450 to the dollar.

The rupiah's exchange rate with the greenback has ranged
between 7,500 and 8,500 recently.

The angry gas suppliers and IPPs said PLN had broken the
contracts under which it had to pay for their gas and power on
the basis of the prevailing exchange rate.

The government has given some subsidies to PLN but these were
only enough to cover the gas and power payments for the first
three months of the year.

The government has said it would not extend additional
subsidies to the company, calling on the company to negotiate
terms of payment with its contractors.

Kuntoro also said he had ordered PLN to boost its efficiency
by changing its material-procurement system.

He instructed PLN to procure all its spare parts only from its
subsidiary PT Pembangkitan Jawa Bali I. (jsk)