State electricity company PT PLN may have to reconsider its investment plans for 2010 following the House of Representatives’ rejection of the company’s request to raise its production cost margin, from the current 5 percent
tate electricity company PT PLN may have to reconsider its investment plans for 2010 following the House of Representatives’ rejection of the company’s request to raise its production cost margin, from the current 5 percent.
“With the five percent margin decision, PLN cannot make the investments detailed in its business plan. We must reevaluate our investment plans and find other ways out,” PLN president director Fahmi Moctar told reporters Monday.
On Aug. 24, the House’s Commission VII overseeing energy and mining approved PLN’s request to have its production cost margin’s raised to 8 percent for 2010.
But, last week, the House’s budget committee rejected the proposal.
As a state company, PLN’s margin is given in the form of government subsidies.
PLN’s says that with the 5 percent margin, and with the Indonesian Crude Price (ICP) set at US$60 per barrel, a total of Rp 44.37 trillion in electricity subsidies will be made available. This will change to Rp 48.38 trillion if the ICP reaches $70 per barrel.
Within the same ICP range, if the margin was 8 percent, subsidy spending would be between Rp 48.31 trillion and Rp 52.50 trillion.
Vice president director of PLN, Rudiantara, said PLN would receive an additional Rp 1.4 trillion in subsidies for each 1 percent raise in its margins.
“With the 1.4 trillion in supplied funds, we will be able to attract financing, either through banking loans or selling bonds, up to Rp 3 trillion,” Rudiantara said.
Fahmi added that, with the 5 percent margin, the company would only able to maintain its cash flow
at a level that will allow the company to avoid technical debt defaults, but not provide much room for
investment.
Included in PLN’s liabilities are the debt it incurred from the $750 million 10-year dollar-denominated bonds it sold in early August.
PLN also receives significant loans from the Asian Development Bank (ADB) and the World Bank.
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