PLN to issue bonds worth $326m in Q3

Ika Krismantari ,  The Jakarta Post ,  Jakarta   |  Thu, 06/12/2008 10:18 AM  |  Business

State power firm PT Perusahaan Listrik Negara (PLN) plans to sell Rp 3 trillion (US$326 million) of rupiah-denominated bonds in the third quarter of this year, an executive says.

President director Fahmi Mochtar said Wednesday after a meeting with the House of Representative that the company would issue the bonds in the third quarter of 2008.

PLN vice president director Rudiantara said the bond proceeds would be used to finance investment and operations.

"We have yet to decide on the exact timing of the bond issue as we are waiting for conducive market conditions," he said.

Indonesia's bonds can be considered unattractive following higher inflation and a weaker global economy, making investors jittery over the ability of companies to pay back on bonds. Investors seek higher yields on bonds as premiums to cover the risks.

PLN has been expanding its operations to overcome power shortages.

The company is planning to acquire two coal firms in a bid to guarantee coal supply for its new power plants under the ambitious 10,000 megawatt (MW) accelerated program.

Fahmi said the company would need an additional 31.9 million tons of coal per year after the new plants go on-line in 2010.

The acquisition is expected to ensure 40 percent of the company's coal supply needs by 2010.

Aside from the 10,000 MW program, PLN will also increase supply of electricity by buying power from independent power producers (IPPs).

"The fundamental problem for the IPPs is their inability to secure funds for expanding power capacity. So we should be more selective in chosing operators to make sure that projects can be implemented," Fahmi said.

As of May 2008, PLN has signed 64 project development agreements with a total capacity of 8,518 MW out of a potential 157 projects representing a total capacity of 32,070 MW.

From the signed project agreements, 16 projects are already in operation, seven are under construction and 41 are still seeking financing.

Copyright © 2008 The Jakarta Post - PT Bina Media Tenggara. All Rights Reserved.