China wants higher interest for PLN?s 10,000 MW power projects

State electricity firm PT Perusahaan Listrik Negara (PLN) is likely to delay the development of several power plants under the 10,000 megawatt (MW) crash program because China from whom PLN expects to get financing is requesting an increase in loan interest rate.

PLN?s President Director Fachmi Mochtar said Tuesday that China's banks, which were initially committed to funding the projects, now requested higher loan interest rates than the figures agreed upon last year.

?The problem is the progress of this project is pretty much depending on the smoothness of the financing flow,? Fahmi said, adding that banks from China were the main financial sources of the program, which depended on dollar denominated loans.

Last year, the consortium of China?s banks, including the Bank of China, the China Development Bank and, the China Export Import Bank, signed agreements to provide PLN with loans amounting to about US$ 1.48 billion.

Fahmi said that part of the loans have been disbursed, but the banks withheld the rest as they were seeking to renegotiate the loan interest.

The 10,000 MW program was launched by the government in 2006 to meet the increasing demand for electricity across the country; especially in Java and Bali. Under the program, 35 coal-fired power plants -- 10 in Java and Bali, 25 outside both islands -- will be built. Some of the power plants are either being constructed or near completion. (*)