PLN signs $615m loan deals, workers continue rally

Ika Krismantari, The Jakarta Post, Jakarta

As thousands of its workers were staging a rally opposing a restructuring plan, state electricity firm PT PLN signed Wednesday a loan agreement worth US$615 million with China Exim Bank to finance the construction of two power plants in Java.

Under the agreement, the bank will provide loans of $330.8 million for the 600-megawatt (MW) Suralaya coal-fired power plant in Banten, and $284 million for the 600-MW Paiton coal-fired power plant in East Java.

The loans will be insured by Sinosure, the Chinese Export Credit Agency, and backed by a full guarantee by the Indonesian Finance Ministry. Finance Minister Sri Mulyani Indrawati, who witnessed the signing, said the government viewed China as "an important supplier and, increasingly, as an important financier for (coal-fired plant) projects".

The government is continuing to implement its 10,000 MW crash program, an aggressive infrastructure development which is expected to provide Indonesia with additional power supply from 35 new coal-fired power plants. Most of the projects are scheduled to come online in 2009 and 2010 and have named Chinese companies as the contractors.

With Wednesday's signing, PLN has secured 23 percent of the total funds needed to finance the projects. PLN has now secured funding for five power plant projects -- the 300-MW Labuan power plant in Banten, the 900-MW Indramayu power plant in West Java, the 600-MW Rembang power plant in Central Java, and the financing for Suralaya and Paiton, which is covered by the current loan agreement.

PLN will need another Rp 61 trillion ($6.5 billion) in loans to complete its ambitious agenda. The total cost of the 10,000 MW crash program will be $8.3 billion (not $4.8 billion as reported earlier).

Also Wednesday, thousands of PLN workers staged a rally outside the State Palace rejecting the results of the company's shareholders meeting on Jan. 8. Shareholders are resolving to spin off two subsidiaries, PT Indonesia Power and PT PJB. The proposed plan is in line with the government's restructuring plan for the state electricity provider.

The restructuring plan was initially proposed by the State Ministry for State Enterprises. It aims to improve the performance of the two units, possibly paving the way for privatization. The PLN union objects to any privatization.

"The PLN labor union rejects the decision of the shareholders' meeting, which clearly harms the people's interests and has the potential of threatening the integrity of the country," the union chief, Ahmad Daryoko, said. "The decision to separate the business units of power supply, transmission and distribution from one another will only make power tariffs more costly."

Commenting on the rally, PLN president director Eddie Widiono said the management regarded the rally as a form of expression for employees, showing that they care about the firm's future. PLN's management and board of directors will recognize the workers input.

He gave assurances that the rally would not result in blackouts, adding also that he would conduct an internal coordination within the management to clear up the current misunderstanding. Energy and Mineral Resources Minister Purnomo Yusgiantoro said the workers actions must not cause blackouts as it would disrupt the nation's activities.