PT PLN aims to lower power price to $0.04
By Johannes Simbolon
JAKARTA (JP): Cash-strapped state electricity company PT Perusahaan Listrik Negara (PLN) will seek to cut the price of power supplied by independent power producers (IPP) to around 4 U.S. cents per kilowatt hour (kwh) in a bid to bring relief to its current financial difficulties.
"We will try to bring down power purchase prices to a fair level," PLN president Adhi Satriya said on Wednesday.
"Based on a comparative study of PLN's power plants and power plants in other countries, we have concluded that a fair price for power supplied by IPPs is around 4 cents per kwh," Adhi told reporters on the sidelines of an electricity seminar organized by Listrik magazine.
He said the new price would be proposed and discussed during contract renegotiations scheduled for December between PLN and 26 IPPs with which the company has signed power purchase agreements (PPA).
Under the agreements, PLN is obliged to buy power from IPPs for an average of 7 cents per kwh.
However, the company has refused to pay this amount in full as a result of financial difficulties stemming from the monetary crisis which has now battered the country for over a year. PLN sells power in rupiah but pays most of its expenses in dollars, including the purchase of power from IPPs.
The company is only willing to purchase power from IPPs at the pre-crisis exchange rate of Rp 2,450 per dollar. At this rate, PLN pays between 2 and 3 cents per kwh.
At the current rate of between Rp 7,000 and Rp 8,000, PLN faces difficulties paying for the power, although not as severe as earlier in the year, when the rupiah was trading as low as Rp 17,000 against the dollar.
A former PLN president acknowledged that the 7 cent average was too high, but said he was "forced" to sign the contracts.
Most foreign power companies operating in Indonesia are backed by former president Soeharto's children and cronies.
PLN announced late last year that it would renegotiate its contracts with IPPs, but the power producers said that they had not yet been approached by PLN on the issue.
Two IPPs have sued PLN and the Indonesian government for breach of contract.
President B.J. Habibie has formed a ministerial task force headed by Coordinating Minister for Development Supervision and State Administrative Affairs Hartarto Hadisoemarto to solve PLN's problems, including its financial dispute with IPPs.
Adhi said most IPPs have expressed understanding of PLN's financial difficulties and are willing renegotiate the contracts.
He said PLN's legal team hired for the renegotiations had taken longer to prepare than individual IPPs because they had to study each of the different agreements.
"But the renegotiations will definitely start in December," Adhi said.
He said that aside from seeking to bring down the price of power supplied by IPPs to a "fair level", PLN would discuss means of allowing it to roll over its debt arrears with the power producers.
Adhi denied allegations that renegotiating the contracts would damage international investor confidence in Indonesia, adding that the unexpected monetary crisis had left PLN with no choice but to renegotiate the contracts.
"PLN will certainly meet its financial obligations but it can't do that right now due to the crisis," Adhi said.
Many of the 26 IPPs have postponed work on power projects in line with the government's retrenchment efforts to deal with the crisis.
Of 10 ongoing power projects, four have come on stream, including the 135-Megawatt (MW) Sengkang gas-fired combined cycle power plant in South Sulawesi, the 165-MW Salak geothermal power plant in West Java, the 80-MW Dieng geothermal power plant in Central Java and the Drajat geothermal power plant in West Java.
Other power projects which will come on stream next year include the 1,230-MW Paiton I coal-fired power plant and the 1,220-MW Paiton II coal-fired power plant, both in Probolinggo, East Java, and the 220-MW Wayang Windu geothermal power plant in West Java.
Adhi said PLN would not take power supplies from Paiton I, Paiton II and Wayang Windu power plants due to the current oversupply on the Java-Bali power grid.
But PLN said it would pay "tolerable" compensation for its failure to purchase power from the three IPPs.
Under a take-or-pay clause in the contract, PLN has to buy 80 percent of the power generation capacity of its IPP. (jsk)