PLN plans $2.5b Islamic bonds in 1H

State-owned electricity company PT Perusahaan Listrik Negara plans to issue between US$2 billion and $2.5 billion in Islamic bonds in the first half of this year, its newly appointed president commissioner said Tuesday.

"We will use the proceeds from the bond issue to finance the development of coal power plants," Alhilal Hamdi told reporters.

PLN also plans to use the funds to convert some of its existing power plants to coal.

The bonds, which will be marketed in the Middle East, will be guaranteed by PLN's assets, valued at $4.5 billion, he said.

PLN has received offers from four investment banks to arrange the bonds issue, Alhilal said.

"HSBC Shariah, a shariah unit of UBS based in the Middle East, Citicorp and Dubai Islamic Bank are on the list," he said.

PLN has appointed state-owned investment bank PT Danareksa as financial adviser for the proposed issue.

The bonds are expected to be well absorbed by the market given PLN's business strength and solid outlook, Alhilal said.

PLN expects its planned power plants will start operation by 2009 with a total capacity of 2,000 megawatts per day. He didn't say how many power plants PLN plans to build.

PLN has said that it also hopes to issue around Rp 3 trillion in local bonds sometime during the first half of this year in order to strengthen its working capital. (*)