Power contract terms reworked soon: PLN
Power contract terms reworked soon: PLN
JAKARTA (JP): Cash-strapped state electricity company PT
Perusahaan Listrik Negara (PLN) will soon start renegotiating
agreements with independent power producers (IPP).
PLN's president Adhi Satriya said in a statement on Monday
that PLN had sent letters to the IPPs notifying them of its
readiness to start renegotiating the contracts.
"Earlier today, letters were sent to the IPPs to commence
discussions. Over the next few months, we will continue meeting
with IPPs and working with them to iron out mutually acceptable
solutions," Adhi said.
He said PLN's renegotiation team, made up of the company's
senior officials and multi-disciplinary staff, had gathered data
and made analyses of the country's economic situation to estimate
PLN's short-term financial condition and to find resolutions that
would be fair to all parties.
Adhi preferred the term "contract rationalization" to
"contract renegotiation".
PLN has power purchase agreements (PPA) with 27 IPPs but it
could not fulfill its contractual obligations following the sharp
depreciation of the rupiah against the dollar since mid-1997.
The state company generates earnings in rupiah but has to pay
most of its costs in dollars, including the purchase of power
supplies from IPPs.
PLN announced huge losses over the past two years and it now
relies on government subsidies to survive.
PLN has argued that the power prices set in the contracts are
too high and has therefore asked the IPPs to lower the prices.
The IPPs, which are mostly international power companies
collaborating with business people linked with former president
Soeharto, have expressed concerns over PLN's move, and some have
lodged charges against the state company at international
arbitration courts for breach of contract.
However, several IPPs have hinted that they would be ready to
compromise given the financial troubles suffered by PLN in the
economic crisis.
Adhi said the renegotiations had several objectives, including
a contractual structure that is commensurate with PLN's financial
resources and restructuring goals.
It also aims at improving the overall efficiency of the
country's power industry; meeting international standards for
disclosures and transparency; and maintaining Indonesia's
attractiveness to investors in the power sector.
Adhi said PLN had always considered a fair resolution of its
contracts with IPPs as a top priority.
"While PLN needs to assure that its customers have adequate
and affordable electricity, PLN also understands that IPPs need
legal certainty and predictability," Adhi said.
He said PLN would duly explain the planned contract
rationalization process to multinational institutions, including
the Asian Development Bank (ADB), the World Bank, and the U.S.
state-owned Overseas Private Insurance Corp (OPIC). (jsk)