PLN workers threaten to strike

PLN workers threaten to strike

Fitri Wulandari , The Jakarta Post, Jakarta

Employees of state-owned electricity company PT PLN have
threatened to strike if the government goes ahead with plans to
sell the company's core business.

Ahmad Daryoko, chairman of PLN labor union, argued that the
sale of the company's core business would burden the public with
skyrocketing power rates.

Ahmad referred to a letter signed by Director General of
Electricity and Energy Utilities Luluk Sumiarso which instructs
PLN to unbundle its transmission, distribution and power plant
units into separate entities.

The letter said the unbundling process should start on Nov.
27, 2003 as stipulated in Electricity Law No. 20/2002.

"This is an entry point for the government to spin off power
plants and retailing operations in Java and Bali from PLN," Ahmad
said in a statement.

The list of core businesses to be spun off from PLN are power
plants, power transmission, power distribution, power sales,
power sales agents, management of the power market, and power
system.

Ahmad said once the units become separate entities, it would
allow the government to sell them to private investors.

"If this happens, the process of selling power will be done by
too many companies. Eventually it will raise power prices," Ahmad
said.

Ahmad warned if the government did not cancel the plan by Nov.
27, PLN workers nationwide would go on strike. During the strike,
the firm's workers would not provide services to the public
including responding to calls if there were power disruptions.

"We apologize to the public for the strike," Ahmad said,
adding that some 48,000 PLN workers nationwide will join the
strike.

The strike, if it materializes, will predictably create chaos
and anger as it will take place when the entire country is still
celebrating the Muslim holiday Idul Fitri. The holiday will fall
on Nov. 25 and Nov. 26.

Based on the power law, the country's power sector should be
liberalized to allow the private sector to manage the business
ranging from operating power plants to becoming power sales
agents.

The law also says when liberalization starts in 2007, PLN is
not allowed to dominate power generation in the "competition
area", that is areas which are considered ready for
liberalization.

Java and Bali are considered to be the first candidates to
become competition areas in 2007 given their huge population,
strong power demand and huge power generation. Both islands now
consume about 80 percent of the country's total power generation
capacity of 21,000 megawatts (MW).

Some fear that the liberalization would cause power rates to
skyrocket since power will be sold by producers to end users
through a chain of agents.

Media reports also said that the unbundling of PLN core
businesses was part of the agreement for a US$242.6 million loan
signed by the government and the World Bank in early October.

The loan was to help finance a number of projects, including
power, gas distribution and health care.

Around half of the loan, or $141 million, would be used to
help finance a number of power projects in Java and Bali.

PLN badly needs a capital injection as it has not made any
investment in power infrastructure since the economic crisis in
1998. Inefficiency meant PLN could not make any further
investments in infrastructure leading to a power crisis in Java
and Bali.

However, in return, PLN must carry out a number of measures.
Among other things, PLN must restructure two of its most
lucrative business units -- PT Indonesia Power and PT Pembangkit
Jawa Bali (PJB).

Both companies provide 80 percent of power supply for Java and
Bali.

The bank asked PLN to group power plants run by both companies
into four or more subsidiaries by the end of 2006.

PT Indonesia Power currently has 132 power plants with a total
capacity of 9,040 MW or half of total installed capacity for the
Java-Bali power system. PJB owns Muara Karang power plant,
Cirata, Gresik, Brantas, Paiton with a total capacity of around
4,300 MW.

Analysts said with such a huge market, it is not surprising
the company would attract investors.

Ahmad added unbundling PLN's core business would cause
imbalance in investment between Java and outer islands.

"Investors would only look at Java and Bali and overlook other
islands. Who wants to invest in places that do not promise
profit?" Ahmad remarked.