Private power companies seek incentives from PLN
JAKARTA (JP): Private power companies would refuse to renegotiate with state-owned electricity company PLN over prices unless PLN offered incentives, industry sources said yesterday.
Sources said PLN's latest proposal to renegotiate with private power companies over prices was understandable, in light of the difficulty PLN faced since it had to buy private power at prices settled in dollars before the monetary crisis began.
PLN should give some kind of compensation to private power companies in return for their willingness to reduce prices, they said.
Compensation could be new licenses to develop new projects or to increase the capacity of their power projects, sources said.
"I think that would be a good solution," said an executive of a power company which had a stake in a large private power project.
Such a measure was once introduced by the government to reduce prices for the coal-fired Tanjung Jati B power plant in Central Java.
Consolidated Electric Power Asia (CEPA) Indonesia, the project owner, was willing to reduce power prices for the 1,320 MW Tanjung Jati B power plant to 5.73 U.S. cents from 6.4 cents after the government awarded it another project with the same capacity.
PLN president Djiteng Marsudi said earlier he had been ordered by Minister of Mines and Energy I.B. Sudjana to renegotiate private power prices following the rupiah's sharp depreciation against the dollar.
Djiteng said the crisis would make it hard for PLN to buy private power in dollars since the dollar's value had dramatically risen over the past several months while PLN's earnings were in rupiah.
PLN had signed a dollar-based power purchase agreement with 29 private power companies before the crisis started affecting the Indonesian currency early July. Since then, the rupiah has depreciated by nearly 35 percent, or by about 40 percent since January.
The private power companies set prices from 5.74 cents to 8.46 cents per kilowatt hour (kWh) for coal-fired power.
"PLN will go bankrupt if it has to buy power at such prices in the future," Djiteng said.
Some private power was scheduled to go on-line next year, including a 1,230-megawatt (MW) coal-fired power plant owned by PT Paiton Energy Co in Paiton, Probolinggo, East Java, and a 135- MW combined cycle power plant in South Sulawesi, owned by PT Energi Sengkang.
Rating
In a related development, Standard and Poor's said yesterday it was seeking further information from the Indonesian government about recent reports that private power purchase agreements with PLN would be opened for renegotiation.
"Support from the Ministry of Finance and the Ministry of Mines and Energy for PLN's obligations is a key consideration in the ratings of power projects Standard and Poor's has assigned in Indonesia," the ratings agency was quoted by Reuters as saying.
It said several independent power projects were rated BBB- minus, including PT Paiton Energy Corp, CE Indonesia Funding and DSPL Finance Co BV.
PLN's obligations to buy power from each of these projects was underwritten by ministerial letters of support or guarantees.
Standard and Poor's said PLN's finances were under pressure from the recent currency devaluation and the price of power had increased about 40 percent since the contracts were first signed.
"Both the minister of mines and energy and the president director of PLN have expressed concern about the high price of the contracts for privately purchased power," the ratings agency said.
However, existing private power obligations were only a small part of PLN's hard currency obligations, with only 18 percent of the capacity of the four rated projects nearing completion and requiring payments in 1998.
"While the power project ratings are currently unaffected, Standard and Poor's is concerned with the implications of the recent announcements and is seeking reaffirmation from the Ministry of Finance that the power purchase agreements for the projects funded by rated debt, that is the Paiton-1, Dieng, Patuha and Gunung Salak projects, will not be opened for renegotiation," it said. (jsk)