CalEnergy lodges claim with OPIC<\/p>\n
WASHINGTON (Dow Jones): California Energy Corp. (CE) has filed
\na claim with the U.S. government's Overseas Private Investment
\nCorp. to cover Indonesian power purchase contracts mired in
\nlitigation.<\/p>\n
CalEnergy, a unit of Omaha, Nebraska-based MidAmerican Energy
\nHoldings Co. (MEC), made the claim on OPIC political risk
\ninsurance for the Dieng and Patuha geothermal power plants on
\nJava, OPIC spokesman Larry Spinelli said Monday.<\/p>\n
In 1996, OPIC granted US$400 million in political risk
\ninsurance for CalEnergy's geothermal investments in Indonesia.<\/p>\n
On May 4, an international arbitration panel supervised by the
\nUnited Nations granted CalEnergy $572.3 million in damages as a
\nresult of the Indonesian state electric utility's default on the
\ntwo projects.<\/p>\n
The utility, Perusahaan Listrik Negara, or PLN, didn't begin
\npayment of damages in the required 30 days, triggering a second
\nphase of litigation to collect payment, said CalEnergy's New
\nYork-based attorney, Jobe Taylor.<\/p>\n
\"OPIC's political risk insurance should cover this,\" Talyor
\nsaid.<\/p>\n
The three-judge arbitration panel's findings show that
\nCalEnergy's contracts weren't tainted by the corruption
\nassociated with many foreign investments during President
\nSoeharto's regime, he added.<\/p>\n
Spinelli declined to say how long it might take for OPIC to
\nprocess CalEnergy's claim. A MidAmerican Energy spokeswoman said
\nlast week the company expects compensation from either Indonesia
\nor OPIC by the end of 1999.<\/p>\n
If OPIC pays CalEnergy's claim, it will likely use its
\nleverage as a government agency to seek repayment from the
\nIndonesian government.<\/p>\n
\"When you have an outstanding claim between OPIC and a
\ngovernment, it is an outstanding claim between the U.S. and that
\ngovernment...you are always confronted with that,\" Spinelli said.<\/p>\n
OPIC hasn't made new financial commitments for projects in
\nIndonesia since 1996 when, in addition to CalEnergy's projects,
\nit provided risk insurance for $170 million invested in Unocal
\nCorp. (UCL) and Tenneco Inc. (TEN) power projects.<\/p>\n
But other U.S. agencies remain active. Thursday, the U.S.
\nExport-Import Bank approved a long-term loan guarantee for $345
\nmillion in airplane exports to Indonesia.<\/p>\n
PLN has said it could take years before the case is resolved.
\nIn a twist in the proceedings, the utility filed a suit at the
\nJakarta district court last week to overturn the arbitration
\npanel's award, claiming it overlooked Indonesia's laws and
\nspecial circumstances. This is despite the fact that PLN had
\napproved the arbitration judges, which were operating under
\nUnited Nations rules.<\/p>\n
\"It's a kangaroo court situation. It's totally illegal,\"
\nTaylor said of PLN's lawsuit. CalEnergy lawyers plan to move for
\nimmediate dismissal when the district court begins hearings
\nexpected June 24, he said.<\/p>\n
An Indonesian embassy spokeswoman declined to comment on
\nCalEnergy's litigation.<\/p>\n
Taylor said he expects hearings for the second phase of
\ninternational arbitration to begin in August or September.<\/p>\n
Another three-judge panel will decide on the second phase of
\nthe case. The panel includes Mr. Setiawansh, a Jakarta-based
\nattorney selected by PLN, Mr. A.A. de Fina, a Melbourne-based
\nattorney selected by CalEnergy, and Mr. Jan Paulsson, the Paris-
\nbased attorney with the law firm Freshfields, who was selected by
\nboth sides as panel chairman, he said.<\/p>\n
Setiawansh is the only new member of the panel, chosen by PLN
\nto replace its panel selection for the arbitration's first phase.<\/p>\n
CalEnergy's case has been closely watched as a harbinger for
\nover 20 other Indonesian power sector projects that are in limbo
\nas PLN tries to renegotiate payment terms.<\/p>\n
Taylor played down the precedent CalEnergy's case may set for
\nIndonesia's other power sector disputes. CalEnergy's contracts
\nwere carefully negotiated for more than two years and didn't
\ndepend on relatives or associates of former President Soeharto,
\nhe said.<\/p>\n
Despite their differences, foreign investors in power plants
\nface similar problems getting payment.<\/p>\n
Before Indonesia's financial crisis, PLN signed long-term
\npurchase agreements with foreign investors who required payment
\nin U.S. dollars. With Indonesia's electricity demand projected to
\ngrow at double-digit rates, the risk appeared reasonable, and
\nthere was no shortage of foreign capital.<\/p>\n
But in 1998, as the dollar value of the rupiah plunged and
\nIndonesia's electricity demand declined, PLN was unable to
\nfulfill the power-purchase agreements.<\/p>\n
Soon after CalEnergy's Dieng geothermal plant began operation
\nMarch 15, 1998, PLN asked that it be shut down. CalEnergy also
\nhalted construction on its Patuha geothermal plant.<\/p>\n
CalEnergy estimates that it lost monthly payments due for the
\nDieng plant of $5 million to $6 million. The arbitration panel
\ngranted $391.7 million in damages for that plant and $180.6
\nmillion for the unfinished Patuha plant.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/calenergy-lodges-claim-with-opic-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}