Blackout-plagued Indonesia firms seek secure power

By Ed Davies

JAKARTA, July 31 (Reuters) - Some Indonesian firms faced by a new wave of power blackouts in Southeast Asia's top economy are prepared to pay up to 50 percent more for electricity to safeguard supplies, a business official said on Thursday.

The country faces a worsening power crisis which threatens to deter much-needed foreign direct investment and alienate ordinary Indonesians as the country heads for elections next year.

The vast archipelago frequently suffers blackouts as its power grid has a power margin reserve of only about 20 percent.

Disruptions in coal shipments have also caused blackouts in Java and Bali, the two main commercial islands, in recent months.

Business groups -- including petrochemical, steel, cement, textile and catering firms -- were holding talks with state power firm PT Perusahaan Listrik Negara (PLN), said Bakti Luddin of the Indonesian Chamber of Commerce and Industry (KADIN).

"Some of the industries or some of the associations are willing to pay up to 50 percent (more) and some of the associations are not willing to pay any more," Luddin, who is chairman of an electricity committee at the chamber, told a panel discussion on energy for foreign correspondents.

He declined to name the firms involved in the talks or say how PLN might be able to improve their supply security.

But he cited the case of PT Tri Polyta Indonesia Tbk, a polyproplyene manufacturer that he said had suffered losses of more than $27 million from power cuts in May and June.

Power prices in Indonesia are heavily subsidised, with a selling price of about 630 rupiah (7 U.S. cents) per kilowatt/hour, or less than half the production cost of about 1,300 rupiah, according to data from PLN.

Coal prices for use in power plants were budgeted this year at 523,000 rupiah per tonne, compared with 800,000 rupiah as of May.

To cope with the current shortages, authorities are forcing some manufacturers to shift production to weekends to cut peak demand in the week, prompting anger from some business groups. Around 3,000 companies would be involved in the latest wave of shifting work to weekends, Ngurah Adnyana, deputy director at PLN for Java and Bali distribution, told the same panel.

Japan's ambassador recently sent a letter of complaint to the government on behalf of about 400 Japanese firms operating in Indonesia, with some threatening to move production to other parts of Asia, such as China, if the situation did not improve.

PLN has said that Java and Bali would remain very vulnerable to power cuts well into next year, and at least until new capacity comes on stream.

Indonesia has embarked on a crash programme to add 10,000 MW of coal-fired power plants by 2010, although some experts say the plan is well behind schedule.

Two 316 MW units of the Labuan power project in Banten province involving China's Chengda Engineering Corp. should come on stream in June, 2009, according to data from PLN.