PLN expects major power companies with contracts to supply electricity to the utility to be flexible in renegotiating contracts, Dow Jones reports.
The company is experiencing severe financial difficulties. The financial turmoil in the Asian markets led to a dramatic fall in the value of the Indonesian Rupiah against the US dollar. PLN is contracted to buy power at rates fixed in dollars, whereas its revenue is in Rupiah.
According to the company, the gravity of the situation dictates that both PLN and the power producers should look beyond the contracts and be ready to take innovative initiatives to resolve the problem. The utility will invite each independent power producer to discuss the problems.
However the government and PLN have also indicated that they will seek to renegotiate contracts, and may terminate some without significant compensation. However the contracts are backed by the Indonesian government so it will ultimately become legally responsible for any compensation.
