PLN secures part of the loans needed for 10,000 MW program

The Jakarta Post, JAKARTA | Wed, 02/25/2009 11:12 AM 

State power firm PT PLN has secured part of the loans needed for its key 10,000 MW program, despite speculation that Chinese banks are holding back on commitments. 

PLN president director Fahmi Mochtar said the power company has just secured a further loan disbursement from the China Export Import Bank (Chexim) for its 10,000 MW power program, which the Chinese investors have pledged will now be made available. 

“We received an additional disbursement of around US$90 million last week from Chexim for our power plant projects in Suralaya and Paiton,” said Fahmi on Tuesday. 

He said that PLN was still in talks with other Chinese banks to renegotiate their commitment terms. 

“We’ve sent a team to discuss the matter with Chexim and they have agreed to increase the drawdown,” said Fahmi. 

The investors — Bank of China, the China Development Bank and the Chexim Bank — have agreed to provide PLN with loans amounting to about $1.48 billion. 

Chexim has so far committed  disbursements of $280 million  for the Suralaya power plant and $330 million for the Paiton power plant. 

The Bank of China has committed to disburse $600 million for the Indramayu power plant, while the China Development bank has committed to disburse $270 million for the Rembang power plant. 

However, the investors have suspended temporarily the release of further  disbursements  saying that they want an increase in interest rates, above those agreed before. 

There is growing speculation that the  row between state airline PT Merpati Nusantara and China’s Xi’an Aircraft Industry may have played a part in holding back  loan disbursements for the PLN  10,000 MW crash energy program. 

Energy and Mineral Resources Purnomo Yusgiantoro told House of Representatives Commission VII  Monday that the Chinese investors wanted the Indonesian government to help settle the Merpati-Xi’an dispute, before they would release all remaining disbursements of loan commitments to PLN. 

“It’s like the loan commitment is being held ‘hostage’,” Purnomo said at that time. 

The Merpati contract dispute started in 2006, when the airline signed a contract with Xi’an for the purchase of 15 Xinzhou-60 aircraft at $15 million each, using a soft-loan facility from the China Export Import Bank. However, after the delivery of two aircraft in 2008, Merpati failed to honor its part of the contract due to its financial problems. Xi’an has said it might take the dispute to  international arbitration. 

The State Ministry of State Enterprises has set up a team, led by Sahala Lumban Gaol — one of the deputies to the minister — to renegotiate the Merpati-Xi’an aircraft contract, but little or no concrete progress has been made on this so far. 

Due in part to its financial problems, Merpati is now placed under a financial restructuring program run by the Asset Management Company (PPA). 

Excluding last week’s deal, PLN have managed to secure around 65 percent of the total financing needed for the 10,000 MW program, which covers the construction of a total of 35 power plants, 10 of them in Java and Bali, with the remaining 25 being off the two main islands. 

Fahmi said recently that the program in total needed $8 billion to be completed. PLN had already secured $5.5 billion and was seeking another $2.5 billion both from local and foreign banks. 

So far contracts for 32 power plants have been signed, and most of these have now  reached the construction phase.  About 7,000 megawatts are scheduled to start operating in 2010, while the remaining 2,000 megawatts  are delayed until 2011 and 2012. 

President Susilo Bambang Yudhoyono has urged PLN to look harder for the financing of the program  with local banks, rather than only foreign investors. 

To anticipate increasing electricity demand, the government has been also been preparing a second 10,000 MW accelerated program, part of which will be directly  PLN’s responsibility, while the rest will comprise independent power producers (IPPs). 

PLN has said that the tenders for some of the projects in the second program would start to be issued at the beginning of the second half of this year. Unlike the first program, which is entirely designated for coal-fired power plants, the second program  includes 12 percent of total power generated by hydro plant, 48 percent by geothermal plant, and 14 percent by gas , plus 26 percent by coal.  (fmb)