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PLN secures Chinese loans for power plants program after Merpati spat solved
The Chinese government has put aside any hard feelings about Indonesian business deals after agreeing to let its lenders ink a US$1
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The Chinese government has put aside any hard feelings about Indonesian business deals after agreeing to let its lenders ink a US$1.06 billion loan deal with state-run power company PT Perusahaan Listrik Negara (PLN) to help finance the government-sponsored 10,000 megawatt (MW) power plant program.
PLN has mobilized $579 million from the Export-Import Bank of China (Cexim) and $455 million from Bank of China (BoC), PLN said in a statement on Monday.
PLN president director Fahmi Mochtar, Cexim vice president Li Jun and BoC general manager of corporate banking department Tang Mao Heng signed the deal on the sidelines of the Asian Development Bank (ADB) annual meeting in Bali.
"Cexim will lend $481 million for (three 350 MW) power plants in Pelabuhan Ratu and $124 million for (two 110 MW) plants in Aceh, while BoC lends $455 million for (three 315 MW) plants in Teluk Naga," said Finance Minister Sri Mulyani Indrawati, who witnessed the signing.
Cexim loans have a 15-year maturity, with a three-year grace period, while BoC loans carry a 13-year maturity, and three-year grace period.
With the loans, taking into account the proceeds from the PLN global bond issue, funding for the much-needed 10,000 MW program has reached 84 percent, PLN said.
So far, PLN has secured $3.25 billion loans from local and overseas lenders to finance the program.
According to PLN, it needs a total of $4.8 billion and Rp 19 trillion for power plant constructions.
"We still need about $1.55 billion (of foreign currency funding) more. We have $900 million (of loans) in process and are still in negotiation, verification, documentation and review," said Rudiantara, PLN's vice president director.
He refused to name the lenders, which are international banks.
Rudiantara said PLN would look for the cheapest loans possible.
With PLN already cashing in some loans, seven of the 10,000 MW projects have been fully funded and can start construction by the year end, according to Rudiantara.
The projects include Paiton (660 MW), Suralaya (625 MW), Labuan (two times 315 MW), Indramayu (three times 330 MW), Rembang (two times 315 MW), Pelabuhan Ratu (three times 350 MW) and Teluk Naga (three times 315 MW).
The Pelabuhan Ratu and Teluk Naga plants are expected to start operating in early 2010, while the Aceh plants should start up in early 2011.
Regarding Mulyani's request to use Chinese yuan instead of US dollars for procurement of project facilities from China, Rudiantara said PLN was still discussing the terms with Chinese banks and contractors.
"This involves two transactions; procurement and lending, then the central bank. Coordination between the parties is needed," he said.
Indonesia and China have agreed to swap Rp 175 trillion or 100 billion yuan (about $15 billion) to lessen exposure to the US dollar, according Bank Indonesia.
"By replacing dollars with yuan, both contractors and PLN will gain as this will reduce losses resulting from currency fluctuations," said Rudiantara.
The loans from China had been put on hold after a row between state airline PT Merpati Nusantara and China's Xi'an Aircraft Industry
The dispute started after Merpati failed to fulfill its commitment to pay up to $230 million for the purchase of 15 Xinzhou-60 aircraft, at around $15 million each, as stipulated in a contract it had signed in 2006 with Xi'an, after delivery of only two aircraft in 2008.
Merpati was using a soft-loan facility from the China Export Import Bank to finance the purchase. Xi'an has said it might take the dispute to international arbitration.
Merpati said it would only be able to pay for a total of eight aircraft due to financing problems.
Aside from that, Chinese banks also requested that Indonesia agree to higher loan interest rates for the PLN loans than those previously agreed upon last year.
It was not until Mulyani's trip to China in late March that the obstacles were cleared. Both countries agreed to review the deal between Merpati and Xi'an and urged the Chinese lenders to stick to their original interest rate commitment.
Indonesia has moved quickly to resolve a string of business problems plaguing its relations with powerhouse China, a step deemed crucial at a time when Indonesia is struggling hard to survive the impacts of the global economic downturn.
"Among the problems that needed to be urgently resolved were China's pledges to help finance our *first phase* 10,000 MW power program. There have been some delays in the channelling of these loans from Chinese banks," said Mulyani on March 23.
