Legal course sought over IPPs<\/p>\n
JAKARTA (JP): The government might seek a court solution as an
\noption to end disputes with independent power producers (IPPs) if
\nthe latter declined to show goodwill in reducing power prices,
\nCoordinating Minister for the Economy Rizal Ramli said on Monday.<\/p>\n
Rizal said that the other option for the government was not to
\ntake any action at all, letting the power projects rust and
\ncausing investors financial losses.<\/p>\n
\"If the investors do not show goodwill in lowering their
\nprices, the government may bring (the problem) to court,\" he said
\nin response to a question from a participant of a business
\nconference.<\/p>\n
He admitted that this was against the stance of the previous
\ncabinet which had dropped the legal-course option.<\/p>\n
\"We want to resolve this problem immediately and amicably, but
\nin return we want the investors to show goodwill by lowering
\ntheir prices,\" he said.<\/p>\n
Rizal said that the 30-year contracts with 27 IPPs would
\nresult in electricity bills totaling US$130 billion for the state
\nelectricity company Perusahaan Listrik Negara (PLN).<\/p>\n
\"This is a time bomb which must be resolved immediately,\" he
\nadded.<\/p>\n
Rizal heads a ministerial team in charge of restructuring PLN.<\/p>\n
Rizal said that four years ago when he was still an economic
\nconsultant, he had conducted a study which drew four conclusions:<\/p>\n
First, there was an overestimation of domestic power demand
\nmade deliberately to justify the private power projects.<\/p>\n
Second, the power projects were made based on nepotism,
\ncollusion, and fraudulent practices because most of the projects
\nwere given to the investors without an open tender process.<\/p>\n
Third, the projects were overpriced by between 30-40 percent
\ncompared to international standards.<\/p>\n
Fourth, the projects would send PLN into bankruptcy if the
\ncompany had to pay all the bills.<\/p>\n
The government signed 27 IPP contracts in the early 1990s to
\nanticipate a higher demand for power as a result of the then
\nrobust economic growth.<\/p>\n
But while construction was still underway, the economic crisis
\nstruck and forced then president Soeharto to halt several power
\nplant projects.<\/p>\n
During the crisis, power demand dropped and the rupiah fell
\nsharply against the U.S. dollar, thus boosting the price of power
\nsold by IPPs to PLN.<\/p>\n
PLN, according to the contracts, is required to buy
\nelectricity from IPPs at an average of 6 U.S. cents per kWh
\n(about Rp 546 at the current exchange rate), as compared to its
\naverage selling price of Rp 240 per kWh.<\/p>\n
Indonesia has since been negotiating with the IPPs to reduce
\ntheir U.S. dollar dominated prices for power sold to PLN.<\/p>\n
There have been allegations that the cost of the power
\nprojects had been marked up which explains why the IPPs set their
\npower price for PLN at an unusually high level.<\/p>\n
Most of the projects involved politically well-connected
\nbusinessmen including family members of Soeharto and their
\nbusiness cronies.<\/p>\n
Out of the 27 IPPs only a handful have started producing
\npower, including Paiton I, Paiton II, Tanjung Jati and the
\nDarajat projects.<\/p>\n
PLN had managed to reach a long-term agreement with PT Amoseas
\nIndonesia, which operates the geothermal fired Darajat power
\nplant in West Java.<\/p>\n
Under the new agreement, PLN will buy power from Darajat at
\n2.72 cents per kWh instead of the contracted 4.54 cents per kWh.<\/p>\n
PLN president Kuntoro Mangkusubroto said recently that PLN
\nwould save $277 million throughout the 30-year contract with
\nAmoseas.<\/p>\n
PLN is currently still continuing negotiation with the other
\nIPPs.<\/p>\n
PLN's first semester financial report showed losses surging to
\nRp 11.58 trillion from Rp 974 billion during the same period in
\n1999. The state company blamed its losses on the increasing
\ncosts of purchasing power from the IPPs.<\/p>\n
PLN also had a total debt of around Rp 43 trillion. The
\ncompany recently appealed to the government to bail out around Rp
\n21.5 trillion of its short-term debt.<\/p>\n
But Rizal said late last week that the government would not
\nmake such a bailout because it would create a bad precedent for
\nother indebted state enterprises. (rei)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/legal-course-sought-over-ipps-1447893297",
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