Southeast Asia power utility reform essential: Consultant

Southeast Asia power utility reform essential: Consultant

SINGAPORE (Dow Jones): Policy-makers in Indonesia, Thailand
and Malaysia should put restructuring of their state-owned power
utilities at the top of their agendas to address their severe
payment crises, an industry consultant said on Tuesday.

"Managing commercially unattractive power purchase agreements
and excess capacity from existing and committed expansions are
major issues facing the national power companies and regulators
in Asian markets," said Ullrich Waeltken, leader of the energy
practice for the Boston Consulting Group.

Waeltken said the countries' power sectors face a financial
"Catch-22" following their national currency depreciations
against the U.S. dollar, which results from five factors: power
purchase agreements in dollars; fuel contracts in dollars;
unhedged borrowing in dollars; electricity prices in local
currency, often at subsidized rates; and a decline in power
demand.

As a result, Perusahaan Listrik Negara of Indonesia,
Electricity Generating Authority of Thailand and Tenaga Nasional
Bhd. of Malaysia urgently need to be restructured, he said.

In Indonesia, the Power Sector Restructuring Policy launched
Aug. 25 is a significant step forward for PLN, which this week
recorded a first-half 1998 loss wider than twice its first-half
revenue. But the policy is untested and needs to be coupled with
fuel subsidy reductions and a master plan for development of the
country's natural gas resources, Waeltken said. In particular,
subsidized diesel burned in power plants should be replaced with
gas.

In Thailand, EGAT is overcoming union opposition to raise cash
through asset sales, including the recent $240 million sale of 15
percent in its Electricity Generating Co. affiliate.

In Malaysia, Tenaga is likely to sell up to a 30 percent stake
to an overseas buyer to meet cash-flow requirements, Waeltken
said.

In all countries, when power purchase agreements aren't viable
any more, they will have to be renegotiated as the governments
lack the funds to fund payment gaps.

Waeltken was in Bangkok to meet with senior officials from
EGAT and Petroleum Authority of Thailand.