PLN told to make long-term contract to cope with coal shortage

The association of Indonesian coalminers (APBI) has asked state owned electricity company PLN to make a long-term coal purchase contract in order to cope with the shortage of coal supply.

The association's chairman Jeffrey Mulyono said in Jakarta on Monday that with a long-term contract, PLN would be guaranteed it would be able to get enough coal supply for the company's future operation.

"However, an adjustment in prices could not be avoided despite the long-term contract to cope with the change in the price of fuel and others," he was quoted as saying. But he ensured PLN that under the long-term contract, the prices of coal would be lower than if PLN bought from the spot market.

According to him, ideally, the current coal prices in the domestic market should be between US$5 to $8 lower than those in the international market.

PLN has warned that it would suffer an acute coal shortage due to the cut in the power supply from the company's existing coal suppliers. Newspaper reported that its suppliers had threatened to cut the coal supply to the Suralaya power plant if PLN refused to adjust upward the coal prices.

At present, state owned coal mining company PT Tambang Batubara Bukit Asam (PT BA) supplies about 60 percent of the Suralaya plant's coal needs. The other 40 percent are supplied by other coal producers Adaro, Kideoco and Berau.

The coal producers have threatened to cut coal supply to the Suralaya power plant in Banten province, if the latter refuses to meet their demand to increase the prices, Petromindo reported on Monday.

However, PT BA had refused to meet its 10-year contract to supply coal to the Suralaya power plant because PLN refused to adjust the coal prices. PT BA had even preferred to impose penalties of up to Rp 3 billion rather than fulfilling its 10-year contract. (dino)