Water rates issue

Water rates issue

We would like to clarify some points relating to the water
rates increase currently being discussed.

We at Thames PAM Jaya (TPJ) are very aware of our
responsibility to the community of East Jakarta that we serve and
are committed to consistently delivering service improvements.

We specifically understand that rate increases are never
popular. However, on this occasion, the rate increase is required
to address a shortfall in payment for services already delivered
that has been accumulating for five years and is now estimated at
US$58 million. This shortfall directly inhibits our capacity to
make the investments essential to improving services. This
increase has absolutely no relation to profit, as is so
frequently misperceived.

It is important to note that the contractual agreement stated
there would be an annual increase to keep rates in line with
inflation and pay toward the investment required to upgrade the
operation -- a further Rp 800 billion between now and 2007.
However, we have had only two increases since 1998, compared with
the five to which we were entitled, creating the debt of which we
now seek a resolution.

The increase is also intended to gradually bring rates into
line with costs, which have been severely impacted by inflation
since 1998.

In the future, TPJ reasonably expects rate increases to be
more consistent and of lower magnitude. We look forward to PAM
Jaya and the Jakarta administration finalizing this mechanism
soon to enable us to continue the investments required to improve
services to customers.

Finally, TPJ understands that all customers merit the same
level of service, no matter what their economic status. This is
why TPJ continues to support cross-subsidy principles to ensure
that customers at all levels may enjoy clean water at a cost
affordable to them. However, please be clear that TPJ does not
set rates, this being the responsibility of the regulator, with
the approval of Jakarta City Council. TPJ only implements the
rates on the instruction of these parties.

JOHN TREW
President Director
Thames PAM Jaya
Jakarta