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tate power firm PT PLN says it has solved the dispute on loan interest with Chinese banks, the investors in the first 10,000 MW program. Both sides will stick to the terms of the initial contract.

"In February, there was an issue about the revision of the terms and conditions of the signed and agreed loans. We (PLN and Chinese banks) have recently sat together to discuss this matter, resulting in agreement to stick to the initial commitment," PLN's vice president Rudiantara told reporters Thursday.

Three Chinese banks have committed to providing loans amounting to about US$1.4 billion for the projects. Bank of China has agreed to provide US$600 million for a power plant in Indramayu, West Java, while China Development Bank (CDB) with $270 million loan for a power plant in Rembang, Central Java. Chexim has agreed to lend $280 million for Suralaya power plant in West Java and $330 for the Paiton plant in Pasuruan, East Java.

The 10,000 MW program, covers the construction of 35 power plants, 10 of them in Java and Bali, with 25 located off the two main islands.

PLN and the government were concerned about the viability of the projects when the banks reportedly asked for revision of loan conditions.

There was more concern when Energy and Mineral Resources Purnomo Yusgiantoro told lawmakers the Chinese banks would hold back on commitments if the Indonesian government did not help settle a contract dispute between state airline Merpati Nusantara and China's Xi'an Aircraft industry.

Rudiantara refused Thursday to comment on being held "hostage" on loan conditions.

He said that after the latest talks with PLN, Chexim, for example, have disbursed another $76 million on top of the $104 million already disbursed previously. "The rest will follow according to the progress of the project," Rudiantara said.

He added there was no problem with the commitments of the two other banks. PLN and the Bank of China have finished required procedures for loan disbursements. "We only need to wait for a final approval from the Chinese government."

The same goes to the commitment of CDB. PLN and CDB are now working out of some procedures, "We expect that the two financing commitments will be disbursed within one or two months from now," Rudiantara said.