Govt agrees to pay OPIC US$290 million claim<\/p>\n
JAKARTA (JP): State electricity company PT PLN said on
\nWednesday that the government had agreed to pay the United States
\nowned Overseas Private Investment Corp. (OPIC) an outstanding
\ninsurance claim worth US$290 million.<\/p>\n
PLN president Kuntoro Mangkusubroto said despite the
\nagreement, the government had yet to negotiate the terms of the
\npayment.<\/p>\n
\"The government assigned PLN to conduct further negotiations
\nwith OPIC,\" Kuntoro said in a seminar on independent power
\nproducers (IPPs).<\/p>\n
He said the government wanted the payment of the insurance
\nclaim to follow terms and conditions outlined in the Paris Club
\nagreement signed by the government with creditors on sovereign
\ndebt in April this year.<\/p>\n
Kuntoro said that based on the Paris Club scheme, the
\ngovernment would pay the OPIC claim in 20 years, including a
\ngrace period of four years, with an interest rate of one percent
\nabove the rate set by the U.S. Federal Reserve.<\/p>\n
OPIC demanded payment from PLN following the state company's
\ninability to pay IPP MidAmerican Energy Holding $572 million in
\ncompensation as ordered by an independent arbitration panel.<\/p>\n
In Sept. 1998, MidAmerican filed arbitration proceedings
\nagainst PLN for its refusal to pay MidAmerican for its power
\nsupplies from its geothermal power plant in Dieng, Central Java
\nand the government's move to suspend its power plant project in
\nPatuha, West Java.<\/p>\n
PLN lost the arbitration proceedings last year and was ordered
\nto pay MidAmerican $572 million in damages.<\/p>\n
As PLN refused to pay, MidAmerican called in its OPIC
\ninsurance.<\/p>\n
In his statement on Wednesday, Kuntoro did not explain why
\nOPIC demanded payment of only $290 million from the Indonesian
\ngovernment.<\/p>\n
U.S. Ambassador to Indonesia Robert Gelbard said that OPIC
\npaid MidAmerican the largest claim in its history.<\/p>\n
Kuntoro further said that the Indonesian government might also
\nhave to pay the World Bank's risk insurance arm, the Multilateral
\nInvestment Guarantee Agency (MIGA), $15 million over suspension
\nof the 500-Megawatt power project owned by American IPP Enron
\nCorp in Pasuruan, East Java.<\/p>\n
MIGA has paid Enron $15 million to settle its insurance claim
\nand Kuntoro believed the agency might demand the Indonesian
\ngovernment reimburse the insurance claim payment.<\/p>\n
The government canceled many power plant projects in late
\n1997, including the Pasuran power plant project, as part of
\nefforts to cope with the economic crisis.<\/p>\n
PLN has signed power purchase contracts with 27 IPPs, under
\nwhich the state company has to buy power supplies from the IPPs
\nin dollars.<\/p>\n
The sharp depreciation of the rupiah against the dollar made
\nPLN unable to buy the IPPs' power at the prices set in the
\ncontract.<\/p>\n
The state company is now renegotiating with the IPPs to cut
\nthe power prices.<\/p>\n
At present, he said, PLN has managed to reduce by 40 percent
\nthe price for the power supplies from the geothermal power plant,
\nowned by American based Chevron and Texaco, in Darajat, West
\nJava.<\/p>\n
According to him, the deal would enable PLN to save at least
\n$277 million throughout its 30-year-long contract with the owners
\nof the Darajat power plant.<\/p>\n
He said PLN also had reached an interim agreement with PT
\nPaiton Energy, which operates the 1,230-MW Paiton power plant in
\nEast Java, allowing PLN to buy the latter's power supplies at a
\nprice below PLN's own power production cost.<\/p>\n
\"We're only paying for their coal plus some fixed fees,\" he
\nexplained.<\/p>\n
Kuntoro said that under the current power purchase agreements,
\nthe government must pay a total of $133 billion to 27 IPPs for
\ntheir power supplies over 30 years.<\/p>\n
\"Our goal now is to reduce that amount by around 40 percent,\"
\nhe said. (bkm)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/govt-agrees-to-pay-opic-us290-million-claim-1447893297",
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