Rizal against PLN proposal to bailout US$2.36b debt
JAKARTA (JP): Coordinating Minister for the Economy Rizal Ramli said on Friday that he would reject a proposal by state owned electricity company PT PLN to bailout its debts of Rp 21.5 trillion (US$2.36 billion).
Rizal described PLN's debt-to-equity swap proposal as inappropriate because it might set a precedent for other state companies.
"So we will not allow this capital injection (plan)," he told reporters after a meeting at the Ministry of Finance.
But he did not say what alternatives would be offered to ease the state electricity company's massive debt burden.
PLN had said earlier that it appealed for a bailout of its massive debts to help avoid bankruptcy.
Rizal, however, added that rejecting the debt to equity proposal was not entirely his decision.
He said the ministerial team, which supervises the restructuring of PLN, would have the final say.
"It (the rejection) will be made under a decision by the presidential decree team, so that we can wrap it up by December," he said referring to the ministerial team by the presidential decree No 133, under which the team was formed.
A ministerial team for PLN's restructuring was established by President Abdurrahman Wahid in December last year.
The team's members are Rizal Ramli, Minister of Foreign Affairs Alwi Shihab, Minister of Finance Prijadi Praptosuhardjo, and Minister of Energy and Mineral Resources Purnomo Yusgiantoro.
Purnomo has said earlier that the government might approve PLN's bailout proposal.
According to Purnomo, the government cannot allow PLN to go bankrupt.
The state company's first half financial report showed losses surging to Rp 11.58 trillion from Rp 974 billion during the same period in 1999.
PLN blamed its losses on the increasing costs of purchasing power from independent power producers (IPPs).
PLN's first half losses occurred despite an increase in net revenue of 30 percent to Rp 10.11 trillion over the period, from Rp 7.75 trillion over the corresponding period last year.
But the cost of purchasing IPPs' power increased four-fold to Rp 4.13 trillion in the first half of the year from Rp 1.07 trillion in the same period last year.
PLN has been hit hard by the economic crisis and the sharp depreciation of the rupiah against the U.S. dollar. The state company sells its power in rupiah but pays most of its costs, including for power from IPPs and spare parts in dollar.
Before the crisis, PLN signed power purchase agreements with 27 IPPs, which carried dollar denominated power prices.
Under the supervision of the presidential decree team, the company is renegotiating their contracts to either terminate them or lower their power prices.
PLN president Kuntoro Mangkusubroto has said earlier this week that PLN's total debt was Rp 43 trillion.
"What we're asking from the government is to bailout our short term debts of Rp 21.5 trillion," he said.
According to him, as long as PLN's production costs are higher than the prices of power, the company will remain in the red.
Kuntoro earlier suggested that the government raise power prices next year by about 2 percent to 3 percent each month.
But he said the price hike suggestion had yet to follow an official proposition to the government.
PLN raised power prices by an average of 29.43 percent in April as part of the government's efforts to cut subsidy spending for electricity. (bkm/rei)