PLN urges Chinese banks to give low-interest loans

The Jakarta Post , Jakarta | Thu, 08/02/2007 12:28 PM | Business

The Jakarta Post, Jakarta

State-owned power firm PLN has asked a consortium of Chinese banks, which have committed to financing a number of the company's coal-fired power projects, to provide low-interest loans.

PLN president director Eddie Widiono said Wednesday that the interest rate on project financing loans should be lower than the interest rate on PLN's recently issued global bond, which stands at between 7.25 and 7.87 percent.

PLN recently received the approval of the State Ministry for State Enterprises to pledge its assets to secure loans for the construction of the new power plants.

PLN had asked for the ministry's permission to use its assets to secure the loans as the Finance Ministry had refused to go guarantor.

PLN has signed agreements with a number of overseas creditors, mainly from China, to finance 85 percent of the cost of power projects worth Rp 79 trillion (US$8.7 billion), but the progress of the projects has been halted due to the lack of a government guarantee.

These projects are part of PLN's fast-track program to provide additional power supply of about 10,000 megawatts by the end of 2009 to cope with the country's acute power deficit.

As part of the fast-track program, PLN signed contracts in March for the construction of five coal-fired power plants, all in Java, with a total capacity of 3,300 MW.

These five power plants are all to be built by Chinese companies, and consist of the 600-MW Suralaya Baru plant in Banten, to be constructed by the China National Technical Import & Export Corp. (CNTIC), the 600-MW Labuan plant in Banten, to be constructed by Chenda Engineering Corporation and its partner PT Truba Jurong Engineering, the 900-MW Indramayu plant in West Java, to be constructed by a consortium of China National Machinery Industry Corporation (Sinomach), China National Electronics Equipment Company (CNEEC) and PT Penta Adi Samudera, the 600-MW Rembang plant in Central Java, to be constructed by Zelan Malaysia, and the 600-MW Paiton Baru plant in East Java, to be constructed by China's Harbin Power.

In April, PLN also signed contracts for the construction of five coal-fired power plants with a total capacity of about 3,600 MW. These consist of one 900-MW plant in Teluk Naga, Banten, and one in Pelabuhan Ratu, West Java, and three 600-MW plants -- one in Jepara, Central Java, and one in Pacitan and one in Awar-Awar, both in East Java.

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