PLN scraps plan to sell Islamic bonds

State owned electricity firm PT Perusahaan Listrik Negara (PLN) will sell dollar-denominated bonds after scrapping a plan to sell as much as $1 billion of Islamic debt to boost power generation, The Jakarta Post reported Saturday.

The company had to cancel the planned sale of Islamic securities because of legal hurdles, State Enterprise Minister Sugiharto told reporters in Jakarta Friday.

PLN will have to wait for the finance ministry to revise the tax law, he said.

?It?s impossible for PLN to sell Islamic bonds because of barriers in the tax system,? Sugiharto said. He didn?t provide a time frame for the sale.

The sale will be the second offering of bonds by PLN this year. On June 5, PLN sold Rp 200 billion ($21.7 million) of Islamic bonds as part of a total sale of 2.4 trillion rupiah of debt.

The company may raise a similar $1 billion from the dollar bond sale, Djuanda Nugraha Ibrahim, a director at PLN said in Jakarta today.

?We have to raise $1 billion as an advance for the power plant projects in Java,? Djuanda said. ?Without the money, we cannot start building the power plants.?

PLN is seeking bids from contractors to build 10 coal-fired power plants on Java island, which is expected to be completed by 2009. The contractors have to provide at least 85 percent of the project cost using export credits.

The utility is scheduled to sign contracts with tender winners on Oct. 20. (*)