Chinese banks may lend $4b to PLN
Friday, June 9 2006 - 12:06 AM WIB
Bank of China, the nation?s second-largest lender, Export-Import Bank of China and China Development Bank have agreed to the loans over the next three years, PLN?s acting president director Djuanda Nugraha Ibrahim said Thursday.
The government ordered PLN to build 10,000 megawatts of coal-fired power generating capacity by 2009 to cut dependence on costly oil-fired electricity. The company, hobbled by the government?s mandate to cap power tariffs, lacks the funds to build new plants.
?The banks require a government to government agreement to be an umbrella for this cooperation,? Djuanda said. ?The loans, however, will be a business agreement between us and the banks.?
PLN plans to build 10 coal-fired power plants with a capacity of between 300 megawatts and 1,320 megawatts each in Java in three years, it said in a May 22 announcement in local newspapers. The projects will expand the utility?s capacity in the country?s most densely populated island by 7,140 megawatts, about a third of the current figure.
The bank loans will be used to buy power generation equipment and technology from Chinese companies developing the Java projects, Djuanda said.
The power plants will cost between $700,000 and $800,000 for each megawatt of capacity, Djuanda said. PLN will need as much as $5.7 billion to finance all the projects proposed for the Java-Bali grid, according to Bloomberg calculations.
?We will provide the rest of the funds for the power plants,? Djuanda Said.
Dongfang Electric Corp., Shanghai Electric Power Co., and Harbin Electric Inc. are among companies qualified to take part in the project, Energy and Mineral Resources Minister Purnomo Yusgiantoro said on April 22 after returning from a visit to China.
PLN plans to sell in the first half of this year between $2 billion and $2.5 billion of bonds that comply with Islam?s ban on the payment of interest to fund the expansion, president commissioner Alhilal Hamid said on April 25.
The utility has hired UBS AG and Dubai Islamic Bank to help sell the bonds, the second-biggest sale of such securities globally, Parno Isworo, PLN?s finance director, said on June 1.
PLN sold Rp 2.4 trillion ($259 million) of local-currency bonds this month. The bonds, which include Rp 200 billion of Islamic securities, will mature in ten years and 15 years.
Indonesia needs to spend about $27 billion on new plants and power lines by 2012 to meet demand, according to the World Bank. Investment last year totaled $1.2 billion, it said. At least 47 more power stations and 14 high-voltage transmission lines will be required in the next 10 years, PLN estimated last year. (*)