PLN may review expansion program

State electricity company PT Perusahaan Listrik Negara (PLN) may review its expansion program if the government demands the company to cut down its operating margin from 3 percent from 8 percent at present.

Murtaqi Syamsuddin, PLN?s director for business and management risk, said in Jakarta on Tuesday that the operating margin should be maintained at least at the current level to ensure that it met the requirements imposed by the company?s lenders and bond holders.

Finance Minister Agus Martowardojo said in Jakarta last week that the government planned to increase the base price of PLN?s electricity in 2012 in order to help curb the surge in the electricity subsidy.

Agus said that the increase in the electricity price could be avoided if the state electricity company could meet three conditions such as by reducing the use of oil-based in the operation of power plants, minimizing power losses and lowering operating margin to 3 percent from 8 percent at present.

Murtaqi said that it would be difficult to meet the finance minister?s recommendation especially those related to the cut in the operating margin. He said that if the operating margin was lowered without the increase in the electricity price, it would weaken the company?s financial capacity to fulfill its targets to expand power plants and distribution networks.

With a lower operating margin, the company would also face a difficulty in obtaining bank loans and in issuing bonds, he said, adding that PLN needed to have a high operating margin in order to be able to secure loans both from domestic and international markets. PLN also needed to have a high operating margin in order to be able to issue bonds, he added. (*)