Indonesia finalising remaining power contracts with IPPs

State-owned electricity firm PT Perusahaan Listrik Negara (PLN) has nearly finished negotiating new contracts with all of the country's 27 independent power producers (IPPs), Coordinating Minister for the Economy Dorodjatun Kuntjoro-Jakti said.

"Our infrastructure is just not up to standard anymore. That is the reason why we try to work very hard with the 27 cases of IPP," he told a luncheon.

"Seven of them are already contracts, and the rest of them are approaching the final stages of negotiation."

He added one case threatens to resort to litigation, but the government is trying to resolve it out of court.

PLN is renegotiating IPP contracts cancelled in the wake of the 1997-98 financial crisis to secure lower power purchasing prices.

The original contracts were signed under the former Suharto government and gave favourable terms to the IPPs, creating huge debts for PLN.

Kuntjoro-Jakti said parliament's response to the government's progress on the IPP contract revisions has been positive, and legislators have agreed to most points under the new electricity law.

"Which for me is as good as a law," he said.

Restructuring the electricity industry is a vital step in Indonesia's economic recovery, he said, with infrastructure in dire need of upgrading and expansion.

PLN last month announced its latest IPP agreement, this time with PT Paiton Energy to buy electricity at 0.0493 usd per kilowatt hour (kWh), down from 0.05 usd under the original contract.

At the time, it said it was in serious discussions with six other IPPs.(*)