PLN urged to negotiate private power prices

PLN urged to negotiate private power prices

JAKARTA (JP): Minister of Mines and Energy I.B. Sudjana
ordered state-owned electricity company PLN to renegotiate with
private power companies over prices following the rupiah's sharp
depreciation against the U.S. dollar, company president Djiteng
Marsudi said yesterday.

Djiteng said the order was given because PLN could no longer
afford private power at prices settled in dollars before the
monetary crisis beset the region.

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

PLN's power purchase contracts with private companies are set
in dollars, while PLN earnings are entirely in rupiah.

PLN signed power purchase agreements with 29 private power
companies with the last agreement signed with PT Power Jawa Barat
in June, one month before the monetary crisis started.

The price of private power, especially from coal-fired plants,
has sparked controversy from the outset as analysts and House
members dismissed it as too expensive.

Private coal-fired power plants have set prices ranging from
5.74 U.S. cents to 8.46 cents per kilowatt hour (kwh) with the
Tanjung Jati A power project in Central Java being the only one
to offer prices below 6 cents per kwh.

The rupiah rate was between Rp 2,300 and Rp 2,400 to the
dollar when the purchase agreements were signed, but the rupiah
has lost about 32 percent of its value since July, closing at Rp
3,550 to the dollar yesterday.

Analysts say PLN has to raise the price of its power by more
than 32 percent from the current average price of Rp 165 per kwh
to cover the cost of private power.

However, observers foresee the public not accepting such a
price hike.

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

He said PLN not only asked for lower prices during the
renegotiations but also demanded 15 percent of profits earned by
private power plants. He did not specify the amount of prices
proposed.

Djiteng did not say which companies PLN was renegotiating
prices with.

Captive power

As part of the rescheduling policy issued last month, the
government has postponed 13 of 29 private power projects which
had signed power purchase agreements with PLN, put six others
under review and allowed ten others to continue.

Djiteng said earlier that PLN had projected that it could lose
at least Rp 1.5 trillion ($421.3 million) next year due to the
rupiah's depreciation.

He said the company was burdened by the depreciation as it had
to pay most of its debt in dollars, while earnings were in
rupiah.

Also, it had to bear additional costs with a possible increase
in gas and diesel fuel prices, which PLN had to buy in dollars as
well.

Sudjana said among measures to be taken by the government to
help PLN solve its financial problems was to limit the
development of captive power.

Such a measure would help PLN improve its access to the large
market potential in the industrial sector, Sudjana said.

Government data shows that there are 9,000 megawatts (MW) of
captive power plants in Indonesia, mostly owned by industrial and
commercial companies.

But a source at PLN said the country's captive power plants
generated up to 16,000 MW, higher than PLN's generation capacity
of 15,940 MW.

The source said owners of captive power plants enjoyed most of
the government's fuel subsidies as they only had to pay Rp 380
per liter of diesel fuel to state-owned oil and gas company
Pertamina, compared to the international market price of Rp
1,100.

The source said a power plant needed 0.3 liters of diesel to
generate 1 kwh power. (jsk)