PLN urged to sell assets to improve financial soundness
JAKARTA (JP): The government has suggested that the State Electricity Company (PLN) sell its 800-megawatt coal-fired power station at Paiton, East Java to improve its financial soundness.
"Yes, selling the assets in Paiton is one of the options being mulled over to cope with PLN's liquidity problems," said Zuhal, the director general for electricity, over the weekend.
Zuhal, who is also the chief supervisor (commissioner) of PLN, confirmed to reporters that the state company had liquidity problems and was in bad need of fresh funds to improve its financial soundness.
"There are three alternatives for PLN to get out of its liquidity problems. Selling the Paiton power station, or selling shares to the public, is one of them," Zuhal said.
The two other alternatives are acquiring additional equity funds from the government and raising electricity tariffs.
He, however, ruled out the possibility of acquiring new equity funds from the government, which is dealing with a severely limited budget itself.
Zuhal also viewed an initial public offering of PLN's share as feasible, in view of its poor financial performance and the long process of obtaining a public listing permit.
"Therefore, selling assets is the best alternative," he said, according to Antara.
Zuhal blamed PLN's liquidity problems on the low rate of return on its investments, or less than 6 percent, and on the aggressive capacity expansion made over the last two years.
"PLN has made a profit of only around Rp 1 trillion (US$427 million) a year, but has invested more than Rp 8 trillion every year," Zuhal noted.
He did not, however, give further details because the planned asset liquidation was still being considered.
PLN's power station at Paiton has two units, each with an installed capacity of 400 MW. It is the first power generation plant to operate in the area, which is being developed into a huge electricity center.
Paiton Energy Co. is building two power units at Paiton with a combined capacity of 1,230 MW, with an estimated investment of $2.5 billion.
Paiton Energy is jointly owned by PT Batu Hitam Perkasa of Indonesia (controlled by Hashim Djojohadikusumo), General Electric and Mission Energy of the United States and Mitsui Co. Ltd. of Japan.
Another consortium, which includes the Bimantara group, is also developing a complex of coal-fired power stations at Paiton, with a total capacity of 2,400 MW and with an investment estimated to reach $2.5 billion.
The power plant project is owned by PT Jawa Power, which is jointly owned by Siemens AG of Germany and PowerGen of Britain.
Tadjoedin Noer Said of the House Budgetary Commission supported the plan to sell PLN's power station at Paiton, but he suggested that the sales be conducted through a competitive, transparent bidding process. (vin)