USAID, WB, ADB extend grant to PLN

JAKARTA (JP): The United States Agency for International Development (USAID), the World Bank and the Asian Development Bank (ADB) have extended a grant to the government to help the state-owned electricity company PLN renegotiate with its power contractors.

Director General of Electricity and Energy Development at the Ministry of Mines and Energy Endro Utomo Notodisuryo said the grant would be used to hire a top lawyer from the United States and a local lawyer to devise "technical strategy" for PLN to face the contractors at the negotiating table.

"They will become legal advisors to PLN," he said.

Endro, however, refused to reveal the amount of the grant or the names of the lawyers.

PLN has been ordered by the government to renegotiate its power purchase contracts with 26 independent power producers.

Some of the power producers have started operation but most are still developing their facilities, some of which have been put on hold by the government in retrenchment measures to cope with the economic crisis.

The crisis, which has seen the rupiah fall in value against the U.S. dollar by more than 70 percent since last July, has battered PLN's financial performance so much that it is no longer able to comply with the contracts.

PLN is looking for changes in several aspects of the contracts, including a decrease to below 6 U.S. cents per kilowatt hour (kwh) for the purchase of power, compared to current prices of between 5.74 cents and 8.4 cents.

PLN also demands that the power volume it has to buy under a take-or-pay scheme be reduced to only 30 percent of the independent power companies' capacity, compared to 80 percent at present.

It also calls for the rescheduling of all power projects not yet completed to avoid a huge oversupply.

Minister of Mines and Energy Kuntoro Mangkusubroto said earlier such renegotiations could take months since the independent power companies opposed PLN's proposals.

The consortium which is developing the 1,230 megawatt (MW) coal-fired Paiton I power plant in East Java announced last week that it rejected PLN's proposal, saying it would sell its power for 7.5 cents per kwh in accordance with its contract.

Paiton I was scheduled to come on stream in the fourth quarter of the year. (jsk)