PLN to make Rp 1.5t bond offer despite poor market

Alfian, The Jakarta Post, Jakarta | Wed, 11/19/2008 11:09 AM  

Against the backdrop of the global financial crisis that has dried up liquidity in many capital markets, state power company PT Perusahaan Listrik Negara (PLN) remains upbeat on its plan to issue Rp 1.5 trillion ($124 million) worth of bonds next month. 

The bonds are aimed at helping the company finance the construction of its power plants and transmission systems, PLN president director Fahmi Mochtar said on Tuesday. 

The seven-year bonds, Rp 500 billion of which will be in the form of Islamic bonds, would be the tenth bond issue by PLN. 

"PLN has submitted all of the required documents for the bond issue to Bapepam (the Capital Market and Financial Institution Supervisory Agency) and is now waiting for the agency's approval," said Fahmi. 

PLN has appointed Bank Niaga as a trustee agent for the bond issue, with Trimegah Securities, Indo Premier Securities and Danareksa Securities as underwriters. 

PLN may face difficulties in selling its bonds as local bonds are becoming less attractive to foreign investors. 

Bloomberg reported that overseas investors cut their holdings in local bonds to Rp 89.4 trillion as of Monday, from Rp 92.8 trillion at the end of last month. 

Fahmi said PLN was fully aware of the current financial conditions which might influence market appetite towards the bonds. 

"We are fully aware of these conditions. That is why we are not making the issue too big. Previously, we planned to sell Rp 3 trillion worth of bonds, but we have cut this to see how the market will react," he said. 

He also said PLN had annulled a plan to sell Rp 10 trillion worth of bonds in foreign currencies. 

PLN is seeking loans to finance its ongoing massive effort to complete a 10,000-megawat (MW) power plant program to meet the increasingly rapid demand for electricity in the country. 

About 6800 MW of this capacity is to be located in Java and Bali, provided by 10 new power plants, while the rest is located outside the Java-Bali system and will be generated by about 20 smaller power plants. 

To complete the program, PLN needs $4.4 billion and Rp 17.33 trillion to build power stations and $934 million and Rp 13.15 trillion for transmission systems. 

As of October, the company has secured US$1.5 billion and Rp 13 trillion both from local and foreign banks.