New rules no fix for Indonesia’s dollar fixation

State power utility PT Perusahaan Listrik Negara (PLN) bills its customers in rupiah, but it needs about $600 million in foreign currency every month to pay local coal miners and power producers and to service its loans.

Under the new regulation, PLN’s payments to local producers can no longer be in dollars, and while that would in theory suit the company, in practice, the rupiah price it pays will still be determined by dollar exchange rates.

“We are still negotiating, but even when we agree to set the contract in rupiah, we have to discuss the exchange rate that will be used,” says Tjutju Kurnia, head of treasury at PLN.

Its vendors have liabilities in dollars, she said, so they have to build in foreign exchange risk.

Some vendors, such as state-controlled coal miner Bukit Asam , with whom PLN has two power purchase contracts, have already adopted settlement in rupiah, but they still quote prices in dollars.

Bukit Asam’s corporate secretary said the firm had a calculation system in place and every dollar cost in their investment or production activities was converted into rupiah.

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Posted May 20, 2015 by repit in News

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