PLN asked to renegotiate loan agreements with Chinese banks

Minister of Finance Sri Mulyani has asked PT Perusahaan Listrik Negara (PLN) to renegotiate loan agreements with the Chinese banks so that the state electricity company could receive the Chinese currency, renminbi, instead of the U.S. dollar. Kompas reported Saturday

?Why should PLN borrow the American dollar, if it will use them to import machinery (to be used for power plants) from China,? Sri Mulyani, who is also acting coordinating minister for economy, said after witnessing the signing of loan agreements between PLN and provincial administration-owned banks.

Sri Mulyani said that borrowing renminbi would not only reduce funding costs but would also free PLN from the exposure of two foreign currencies. By borrowing the US dollar, the company will need to buy renminbi in buying the Chinese machinery, and at the same time it will need to buy the US dollar in paying the debts, she added.

PLN said recently that it would soon sign loan agreements worth about US$1.3 billion with two Chinese banks. Under the agreements, China Export Import Bank (Cexim) would provide $899 million, with the other $455 million to be provided by Bank of China (BoC) and Chinese Development Bank.

PLN had so far secured a total of $5.5 billion in funding to finance its 10,000 MW fasttrack program, including around $1.7 billion signed with Chinese lenders last year, out of a total of about $8 billion. (*)