RI agrees with Siemens on electricity price

RI agrees with Siemens on electricity price

Muklis Ali, Reuters, Jakarta

Indonesian state electricity company PT Perusahaan Listrik Negara (PLN) agreed on Wednesday to pay 4.80 US cents per kilowatt hour to PT Jawa Power, majority owned by Siemens AG, a senior PLN official said.

The cash-strapped state giant will also pay around $400 million in arrears to Jawa Power after years of failed negotiations centering around PLN's objection to the unit price, which it said was too high and had been imposed on it by the government of former president Soeharto.

"These have been long negotiations with Jawa Power but now the government has agreed that PLN will pay 4.80 cents per kilowatt hour (kWh) to Jawa Power for 30 years. This is a breakthrough," PLN President Director Eddie Widiono told reporters.

"We will sign the terms of agreement as soon as possible," he added, without elaborating.

PLN signed a power purchase contract with Jawa Power in 1995 under which it agreed to pay around 6.5 cents per kWh for electricity supplied from Jawa's 1,230 megawatt power generator in East Java.

However PLN has long complained this price was prohibitive and since President Soeharto stepped down in 1998 amid mass riots in the capital, the state giant has sought to change what it considered an unfair agreement.

Under this contract, Jawa should have started supplying power to the state company almost two years ago but the dispute interrupted supplies although PLN is still liable for several hundred million dollars in unpaid charges.

"According to the original contract PLN must take electricity from Jawa Power starting in early 2000 and so because of that we must also pay around $400 million," Widiono added.

PLN also signed a number of power deals with other independent power producers (IPPs) in the 1990s and the debt-ridden state enterprise, hit hard by Asia's economic crisis of 1997, has been locked in pricing disputes with many of these.

The state company has long held a monopoly on electricity supply in Indonesia and for decades relied on massive state subsidies to deliver at very low prices. But Indonesia is still struggling to recover from the Asian crisis so PLN, like most companies, has mountains of bad debt.

PLN needs the IPPs to help boost its power capacity and meet demand, which Mines and Energy Minister Purnomo Yusgiantoro said recently would grow at around 12 percent a year throughout the sprawling archipelago.

Purnomo has also warned that Indonesia would face power shortages in 2003 or 2004 if capacity wasn't increased.

A PLN official said electricity capacity across Java and the resort island of Bali would be 18,377 megawatts (MW) in 2001 and 2002 but would increase to 19,697 MW in 2003.

Much of Indonesia's manufacturing takes place on Java.

Separately, Purnomo said on Wednesday PLN would cooperate with China to build a small coal fire power generator in Sumatra.

"We plan to build two 50 MW coal fire generators in Sumatra in cooperation with China. This is as part of increasing bilateral relations between Indonesia and China," he said without giving details.