Govt mulls capital placement in PLN

Mines and Energy Minister Purnomo Yusgiantoro said on Saturday the government is considering a capital placement to bail out the troubled state utility company, Perusahaan Listrik Negara (PLN).

"Talks with the Ministry of Finance are now underway," Purnomo told the press in Bandung, West Java.

It was PLN's president director, Kuntoro Mangkusubroto, who brought up the issue when he asked the government last week to inject Rp12 trillion into PLN as a capital placement in a bid to give fresh blood to the moribund company.

"The state badly needs PLN as the national power provider. If PLN is ill, then the nation is unfit too. Worse still, an electricity crisis is expected to hit the country in 2004," Purnomo said.

PLN is facing bankruptcy over its mounting US$133 billion debt to 27 independent power producers (IPPs).

Deals with the IPPs were signed under the corrupt regime of Soeharto, who was forced down in May 1998 after 32 years in power.

Soeharto is accused of massive corruption and power abuse during his reign.

The PLN has said it aims to renegotiate the unfavorable contracts with the IPPs in its bid to cut costs by US$6.1 billion over five years.

Kuntoro said last Friday that of the total, 23 contracts need to be renegotiated, while four other had already been settled.

As the contracts were signed before the economic crisis, those deals have brought PLN to its feet as it buys the power in dollars and sells it in rupiah.

At the peak of the crisis, the rupiah lost 80% of its value against the US dollar. This year, the rupiah has fallen 22% to the greenback.

For the first six months of the year, PLN posted a net loss of Rp11.6 trillion. Kuntoro also said that PLN has been ordered to resolve disputes with the IPPs in the first quarter of next year. (*)