PLN intends to use rupiah rate in buying electricity from IPPs

The government is studying the possibility of using rupiah rate in the purchase of electricity by state owned electricity company PLN from independent power producers (IPPs) in a bid to reduce foreign exchange loss from the depreciation of the rupiah against the U.S. dollar, Koran Tempo reported on Tuesday.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro, Director General of Electricity Yogo Pratomo and PLN's President Director Eddie Widiono, and their respective staffs held a meeting on Monday to discuss the plan.

Eddie said that both the government and PLN had in principle agreed to use rupiah rate as the base in purchasing the power from IPPs in a bid to reduce the transaction loss that might be caused by the sharp fluctuation of the rupiah against the U.S. dollar.

The impact of the fluctuation of the currency rate has contributed to a great financial loss to PLN, which buys its power from IPPs in U.S. dollar. In 2004, the company for example incurred a loss of Rp 1.67 trillion due to the appreciation of the American currency against rupiah. The amount represented more than two-third of PLN's total losses which reached about Rp 2.02 trillion during the year.

The prices of power bought by PLN from IPPs are mostly based on U.S. dollar. PLN for example buys its power from PT Geo Dipa Energy, the operator of the Sarulla geothermal power plant, at 4.455 US cent, and at 4.93 US cent from Paiton Energy, the operator of the Paiton I power plant. (*)