Edison investigating its Indonesian power project<\/p>\n
NEW YORK (Dow Jones): Edison International has launched an
\ninternal investigation into its US$2.5 billion power-plant
\nproject in Indonesia, which has been plagued by charges of
\ncorruption and excessive electricity tariffs, according to people
\nfamiliar with the inquiry.<\/p>\n
They said the Los Angeles-based law firm of Munger, Tolles &
\nOlson has been conducting interviews with past and present
\nemployees of Edison's independent power-plant unit, Edison
\nMission Energy, about the Indonesia project.<\/p>\n
The inquiry comes as Edison, of Rosemead, California, is in
\nnegotiations with the Indonesian government over its contract
\nwith the state-owned electric utility that had agreed to buy
\npower from the plant.<\/p>\n
The Paiton power plant, located outside of East Java, is
\nEdison's biggest independent power project, and was the first
\nlarge-scale private project for Indonesia. The plant, 40 percent
\nowned by Edison, is scheduled to start generating electricity
\nwithin a few months.<\/p>\n
Indonesia's economic crisis has thrown into question how much
\nEdison will get paid for the electricity -- or whether Edison will
\nget paid at all.<\/p>\n
Edison signed a long-term contract in 1994 with government-
\nowned electric utility PT PLN, which agreed to pay more than
\neight cents a kilowatt hour for the electricity. The government
\nnow has told Edison it can't pay that rate.<\/p>\n
Edison's inquiry is focusing, at least in part, on the
\nstructuring of this electricity tariff, now under scrutiny
\nbecause it is much higher than other tariffs in the country.<\/p>\n
The lawyers also have been asking questions about the
\nstructuring of a carried-interest loan from Edison to an
\nIndonesia company, PT Batu Hitam Perkasa, which is owned by a
\nrelative of former president Soeharto by marriage and a close
\nfamily friend. The loan gave a 15 percent stake in the project to
\nPT Batu without investing any cash, according to Edison officials
\nand project-related documents.<\/p>\n
Edison owns 40 percent of the power project, and has invested
\nmore than $300 million in capital to date, the company said.<\/p>\n
General Electric Capital has a 12.5 percent interest, and
\nMitsui & Co. of Japan owns 33 percent.<\/p>\n
Edward Muller, president and chief executive of Edison Mission
\nEnergy, said Edison made a proposal late last year for
\nrestructuring the power-purchase contract that is "attractive for
\nus and the Indonesia government." He declined to comment on the
\nwork of Munger, Tolles & Olson. "I have no intention of
\ndiscussing this law firm's work or nonwork on any matter," Mr.
\nMuller said. He said he doesn't know how the Indonesia project,
\nonce expected to be a cash cow for the company, will affect
\nearnings, but added that Edison won't be taking a charge on the
\nproject.<\/p>\n
Former U.S. Secretary of State Warren Christopher, who sits on
\nEdison's board and consulted on the projected early on, also has
\nbeen negotiating with the government, Edison officials said.<\/p>\n
Meanwhile, another company involved in major power projects in
\nIndonesia, CalEnergy Co., is in arbitration over one project,
\npeople familiar with those negotiations said. Edison said it
\nhasn't yet filed for arbitration.<\/p>",
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