Friday, April 3, 2009

Negotiate with China on funds, or local banks?

PLN should negotiate with China on funds, or local banks. PT PLN is still facing financing problems with its first 10,000 megawatt (MW) crash program because of the “unsmooth” partnership with the Chinese government as one of its biggest investors, according to President Susilo Bambang Yudhoyono. 

Yudhoyono said Monday he had instructed several Cabinet ministers and PLN executives to discuss and find solutions on this matter, including continuing negotiations with China and finding alternative sources of loans from domestic lenders. 

“Physical construction of the first steps of the 10,000 megawatt crash program has actually run fast, but there are some hindrances here and there due to financing problems,” Yudhoyono told the press after a meeting with PLN executives at the company’s headquarters. 

“I’ve asked related ministries and PLN executives to continue negotiations with China so as to ensure smooth disbursement of the funding. In the event they fail to generate solutions, (I’ve asked them to) use domestic sources more,” he added. 

Yudhoyono said using funds from the local banking sector was the best option, adding he had no plan to suggest PLN seek loans from other foreign sources.  

The 10,000 MW power program was launched in 2006 to meet the increasing demand for electricity nationwide, especially for the Java-Bali system. 

The program included 35 power plants, 10 of them in Java and Bali, while the remaining 25 were off the two main islands. So far contracts for 32 power plants have been signed, and mostof these have now reached the construction phase. 

PLN says the program requires US$8 billion in total, 85 percent of which is expected to come from local and foreign investors and 15 percent of which to be covered by PLN from its own resources. 

PLN’s head of team for the acceleration of the first 10,000 megawatt program, Yogo Pratomo, said PLN had managed to secure Rp 17 trillion ( US$1.45 billion) of investment from local banks and $2 billion in foreign currency, most of which came from the Chinese government. 

Yogo said problems with China regarding financing issues were threatening among others, the planned power plant at Indramayu, West Java, originally scheduled to start operation this year.
PLN said earlier about 1,000 me-gawatts made up of three new plants, including Indramayu, should have commenced commercial operation in 2009, but were now delayed. 

About 7,000 megawatts are scheduled to start operating in 2010, while the remaining 2,000 megawatts are delayed until 2011 and 2012. 

To anticipate increasing electricity demand in the future, the government has been also preparing a second 10,000 megawatt accelerated program, part of which will be directly PLN’s responsibility while the rest will comprise independent power producers (IPPs). 

PLN has said that the tenders for some of the projects in the second program would start to be issued at the beginning of the second half of the year. 

Unlike the first program, which is entirely designated for coal-fired power plants, the second program includes 12 percent of total power generated by hydro plant, 48 percent by geothermal plant, and 14 percent by gas , plus 26 percent by coal. 

The second program is scheduled for completion by 2012.
Souerce: Erwida Maulia , THE JAKARTA POST , JAKARTA | Tue, 02/10/2009 12:51 PM | Business