Enron seeks to revive US$525m power project<\/p>\n
JAKARTA (JP): Enron International, a major American energy
\ncompany, is seeking to revive its US$525 million power project in
\nEast Java which the government postponed in September as part of
\nspending cuts forced by the currency crisis.<\/p>\n
The Houston-based Enron, through its subsidiary Enron Java
\nPower Corp, has invested $25 million to lay the groundwork for
\nthe project in Pasuruan, East Java, which would have become the
\nfirst independent natural gas-fired power plant in Java.<\/p>\n
The gas was to have come from a field in the Strait of Madura
\nwhich was being developed by Mobil Oil Corp of the United States
\nfor Pertamina, the state-run oil company. The plant had
\noriginally been slated to begin production in 2000.<\/p>\n
The 500-MW combined cycle gas-fired power plant was one of
\ndozens of projects canceled in September in order to save foreign
\nexchange and ease pressure on Indonesia's balance of payments.<\/p>\n
Enron International chief executive officer Rebecca Mark said
\nyesterday that she fully understood the Indonesian government's
\ndecision, and had initially accepted it.<\/p>\n
But since then, several power projects, which were canceled
\nalong with Enron's Pasuruan plant, had been revived, at the
\ninitiative of PLN, the state-run electricity company. These
\ninclude three 1,320-MW plants at Tanjung Jati and several
\ngeothermal projects.<\/p>\n
Mark questioned PLN's decision to sideline Enron's project,
\narguing that by all economic and environmental considerations,
\nher project should be the first to be revived.<\/p>\n
The Pasuruan plant would not only provide far cleaner energy
\nthan from coal-based power plants, but it would also be far more
\neconomical, with a net cost of 4.6 U.S. cents per kWh.<\/p>\n
This compares with more than 8 cents for some coal and
\ngeothermal plants, and from 5.73 to 6 cents for the Tanjung Jati
\nplants, Mark said.<\/p>\n
Enron's project has all contracts and permits completed. It
\nwas only days from closing the financing, she said.<\/p>\n
PLN had reportedly responded to Enron's queries by saying that
\nJava, the target market for the Pasuruan plant, had excess in
\ncapacity with all the new coal power projects underway.<\/p>\n
\"I'm just puzzled by their decision,\" said Mark, who is in
\ntown to discuss the fate of the Pasuruan plant with officials.<\/p>\n
The state electricity company has come under severe criticism
\nthese past few weeks about some of its decisions in awarding
\npower contracts. PLN president Djiteng Marsudi publicly admitted
\nlast week that many of the decisions were influenced by third
\nparties.<\/p>\n
Enron began negotiations for the project as far back as 1993
\nwhen it received investment approval.<\/p>\n
It formed a joint venture called PT East Java Power with
\nIndonesian investors that included big names in business such as
\nAnthony Salim, Ibrahim Risyad, Johannes Kotjo and Bambang
\nTrihatmodjo.<\/p>\n
Contracts<\/p>\n
Enron also assisted PLN and Pertamina in drawing up the
\ncontracts for the unprecedented gas arrangements and helped
\nformulate the pricing of gas and many associated technical
\naspects.<\/p>\n
In November 1996, PT East Java Power signed a power purchase
\nagreement with PLN. In May this year, it received the central
\nbank's approval to obtain foreign commercial loans. And as late
\nas Sept. 11, it signed a gas sales agreement with Pertamina.<\/p>\n
Nine days later, Enron was formally notified of the
\npostponement.<\/p>\n
\"We were just days from concluding the financial
\narrangements,\" Mark said. There was no previous warning
\nbeforehand, she said. \"All the loan documents were being signed.\"<\/p>\n
Still bewildered, the Enron CEO has not given up hope.<\/p>\n
\"We have a fairness argument,\" Mark said, noting that in
\nFebruary, the government is scheduled to review again whether or
\nnot to allow those projects shelved in September to continue.<\/p>\n
Mark said she feared the PLN's decision to develop the coal
\npower plants would minimize the likelihood of the Pasuruan
\nproject getting the go-ahead.<\/p>\n
Asked if Enron was considering a lawsuit against the
\nIndonesian government, Mark said: \"Legal consideration won't help
\nanyone. We're not looking at the legal aspects. We want to find a
\nsolution.\"<\/p>\n
Mark is no stranger to solving disputes in developing
\ncountries.<\/p>\n
The Harvard MBA graduate led Enron's one-year long campaign to
\nrevive a 2450-MW power plant in Dabhol village in the Indian
\nstate of Maharasthra which had been canceled in 1995 by the state
\ngovernment. Her persistent lobbying paid off and the Dabhol
\nproject is now near completion.<\/p>\n
Enron, which runs various gas and power projects worldwide,
\nincluding the largest gas pipe network in North America, is
\nlooking at other investment opportunities in Indonesia, she said.<\/p>\n
Indonesia is one of five emerging market countries where Enron
\nis focusing its activities.<\/p>\n
But future investment in the country hinges on the outcome of
\nthe Pasuruan project. \"It's our first, and we hope it will not be
\nour last project in Indonesia,\" she said. (emb)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/enron-seeks-to-revive-us525m-power-project-1447893297",
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