Aid for Indonesia utility as IPPs renegotiate tariffs

Aid for Indonesia utility as IPPs renegotiate tariffs

The Indonesian government is to subsidize the state-owned utility PLN to take care of its operational flow deficit. The subsidy coincides with a decision by several IPPs to renegotiate tariffs.

The subsidy will see the government provide $705m over five months until March 1999. However, PLN will be barred from investing the money. For the rupiah-earning company with dollar obligations, foreign exchange losses pose the bulk of the problem. PLN`s obligations between April 1998 and March 1999 are estimated at about $1.46bn.

PLN could economize by cutting back on power purchases, worth about $400m, from private firms building Paiton I and II. There is said to be an oversupply of 3500 MW partly due to the business slump.

Paiton I is one of the IPPs which have agreed to renegotiate tariffs the others are Salak and Drajat. The 1230 MW coal fired Paiton I project was due to come on stream in November. The projects are among 26 IPP projects that signed agreements with PLN between 1995 an 1997.

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