Jakarta Globe reported that worried about an inadequate and unreliable power supply, steel producer Krakatau POSCO has signed a deal with state utility Perusahaan Listrik Negara to pay a premium in exchange for improved service levels.

PLN said in a statement that the deal with the JV between Indonesia's Krakatau Steel and South Korea's POSCO will valid for 10 years. Under the deal, PLN will charge steel producer Krakatau POSCO a premium rate of IDR 810 per kilowatt hour, which is higher than for ordinary customers, who pay IDR 604 per kwh.

Mr Murtaqi Syamsuddin planning and risk management director of PLN and Mr Kim Dong Him president director of POSCO signed the deal at PLN headquarters in Jakarta.

Many major corporations and manufacturers operating in the country are seeking ways to ensure a reliable power supply and avoid power shortages, which are common here.

PLN said in the statement that "This is a special price to guarantee power supply."

Several other Indonesian companies have already signed similar deals with PLN. In 2011, South Korea's largest tire producer Hankook Tire signed a 20 year contract power supply with PLN.

The utility charged Hankook IDR 745 per kilowatt hour, earning PLN IDR 5.5 trillion from the power deal. Hankook is planning to spend USD 1.2 billion to build a manufacturing plant in Cikarang, West Java.

Mr Fazwar Bujang president director of Krakatau Steel said that Krakatau POSCO would establish 23 new subsidiaries to provide a variety of products and services to the JV.

Krakatau POSCO, based in Cilegon, plans to develop the capacity to produce 3 million tonnes of slabs and plates per year at a total estimated cost of USD 6 billion.

Mr Bambang said that PLN would continue to secure similar deals with other companies in Indonesia, including cement makers and car companies, though declined to identify particular companies. PLN is tasked with providing an additional 55,500 MWs of power nationwide by 2019.

(Sourced from www.thejakartaglobe.com)