Govt issues guidelines on guarantee for PLN projects

The ministry of finance has issued guidelines on the provision of the government's guarantee for coal-fired power projects to be built under the crash program to provide additional power supply of 10,000 MW, Investor Daily reported Thursday.

Under the guidelines, which are stipulated in the finance ministry's regulation No 146/PMK 01/2006 and began effective on Dec. 29, 2006, the guarantee would be given to creditors who provide the financing for power projects to be built under the Presidential Decree No. 86, 2006 on the government's fast track electricity program.

The guarantee would be provided if PLN fails to fulfill its financial obligation due to four major reasons; the change in the government's policy on electricity prices, on electricity subsidy and on coal supply price, as well as the government's decision to cancel or delay the projects.

The government's guarantee will be the last resort in nature, meaning that it will be given only if PLN is unable to meet its financial obligation with its own financial resources.

In order to be able to get the guarantee, the creditors should meet certain conditions including its ability to disburse the funds according to the schedule, and to get certainty from contractors that projects can be completed on schedule. (*)