After recently securing dollar-denominated loans, state power company PT Perusahaan Listrik Negara (PLN) is set to ink a deal with a consortium of local banks to securing Rp 5.71 trillion (US$615 million) worth of loans, an official says.

Head of the government's power sector development program Yogo Pratomo said Wednesday the loans would be used to finance the construction of five power plants under the government-sponsored 10,000 megawatts (MW) program.

Some Rp 1.91 trillion of the loans would be allocated for the construction of the 600-MW Rembang plant in Central Java, Rp 1.27 trillion for the 600-MW Indramayu plant in West Java, and Rp 1.19 trillion for the 600-MW Labuan plant in Banten.

The remaining Rp 600 billion would be used for the 600-MW Paiton Baru plant in East Java, and Rp 740 billion would go to the new 600-MW Suralaya plant in Banten.

Yogo said state-owned banks (Bank Mandiri, Bank Negara Indonesia and Bank Rakyat Indonesia) and private banks (Bank Mega and Bank Central Asia) were set to join the consortium.

However, he said, the amounts of loans and the interest rates were still undecided.

An official announcement of the deal would be made at the Finance Ministry next Friday.

The government is still open for bids from foreign and local banks to get involved in financing several other power projects.

Thus far, China Export Import Bank and UK-based Barclays are among the few foreign banks that have expressed interest in the projects.

With the upcoming loan agreement, PLN had so far secured loans worth $2.37 billion from local and foreign banks.

The amount is still far short from the $8.3 billion needed to build 35 coal-fired power plants in and outside Java to meet the 10,000 MW crash program, which is scheduled for completion in 2010.

The planned power plants are expected to expand the nation's electricity coverage, which currently stands at 56 percent.

The plants are also aiming to cutting PLN's running costs by Rp 3 trillion annually because coal-fired plants are cheaper to operate than those using diesel-fuel.

At present, more than 70 percent of PLN's power plants are powered by oil-based fuels.

Recently, PLN announced local coal company Hanson Energy had won a tender to supply coal to fire its six new power plants.

The 20-year supply contract would ensure a supply of 4.3 million tons of coal per year, valued at Rp 28 trillion, Hanson president director Setiawan Boedi said in a statement.

Meanwhile, in response to the surge in the price of steel needed by PLN for the construction of its plants, PLN president director Fahmi Mochtar was positive about securing steel based on old prices as cited in existing contracts with developers.

"They (tower fabrication association) should honor what they have signed in the contracts," Fahmi said.

Recently, the association has urged PLN to revise its contracts with 42 developers, following a jump in steel prices to Rp 9,700 per kilogram from around Rp 7,000 per kilogram last October.

The association has estimated the steel may account for 70 percent of the total construction cost.

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