PLN's spending may jump by Rp 7.5t

Leony Aurora, The Jakarta Post, Jakarta

State power firm PT Perusahaan Listrik Negara (PLN) will see its operating costs jump by Rp 7.5 trillion (US$766.48 million) if the government decides that the company should pay for 3.09 million kiloliters (kl) of over-quota fuel based on market prices.

PLN president director Eddie Widiono told reporters on Wednesday that should this happen, the company would seek loans to maintain its cash flow position.

"The government will decide on this matter in October," he said on the sidelines of an energy seminar.

PLN has requested state oil and gas firm PT Pertamina to provide the 11.44 million kl needed to generate power this year, more than the allocated quota of 8.35 million kl.

Pertamina said that it could supply the fuel, providing that the power firm paid based on the market price, which is about twice what PLN pays currently at Rp 2,200 per liter.

According to data provided by PLN, even with subsidized fuel, whose price was hiked by an average of 29 percent in March, the company will spend Rp 6.7 trillion more on fuel this year as compared to last year.

"Our cash flow would still hold out if we got subsidized prices, as the spending is spread over 12 months," said Eddie. However, if the company has to spend an extra Rp 7.5 trillion during the last three months of this year, it would have to seek loans.

Short-term loans would be preferable for plugging the cash flow deficit rather than issuing bonds, Eddie said, even though they would incur higher interest.

"We expect the use of oil to decline significantly by 2008," he said, as by that time gas and coal-fired plants would predominate. Bond proceeds should be used to finance expansion, he explained.

"We are already in talks (with lenders)," he added.

PLN had postponed some investments -- but not in power generation -- to cover fuel costs, which account for about 35 percent of the company's operating costs.

Eddie further said that even with subsidized fuel for the rest of the year, PLN was likely to see its operating balance return to the red as the government had decided not to raise electricity prices this year.

"Our costs have gone up. Without any increase in income, we will see an operating loss this year," said Eddie.

PLN booked another year of net losses in 2004 at Rp 2.02 trillion but managed to record an operating profit of Rp 2.56 trillion, the first time since the monetary crisis in 1997 prompted a string of losses.

Some 18 percent of electricity in the country is generated using subsidized oil.