PLN optimistic about contract compromise<\/p>\n
SINGAPORE (Dow Jones): Endro Utomo Notodisuryo, director
\ngeneral of Electricity and Energy Development in Indonesia's
\nMinistry of Mines and Energy, said he is confident state-owned
\nutility Perusahaan Listrik Negara, or PLN, will reach a
\ncompromise with independent power producers to renegotiate past
\npower purchase agreements.<\/p>\n
\"We want a solution to be achieved that will satisfy both
\nparties,\" Endro told Dow Jones Newswires on the sidelines of an
\nAsian power conference in Singapore Tuesday. \"We expect that the
\nother parties have the same attitude to try to find a just
\nsolution.\"<\/p>\n
PLN is embroiled in talks to renegotiate power purchase
\nagreements, or PPAs, with several independent power producers
\nthat were signed under the regime of former President Soeharto.
\nPLN claims it was forced to sign \"marked-up\" power deals because
\nof corruption, collusion and nepotism under the Soeharto regime.<\/p>\n
In all, PLN signed 27 contracts to purchase power from
\nmultinational firms in the past decade, most of which were
\npartnered with members of Soeharto's family.<\/p>\n
Endro said the new Indonesian government is trying to
\nrenegotiate the IPP contracts using international standards of
\nconduct.<\/p>\n
\"We're not barbarians. We understand the sanctity of a
\ncontract,\" he said. \"Now it's very important for me and for the
\nIndonesian government to show the international community that
\nalthough the IPP contracts have become a burden to us, we will
\nsolve (disputes) using a team approach and international
\nstandards.\"<\/p>\n
The government took over all IPP negotiations in December in
\nan effort to salvage investor confidence in Indonesia.<\/p>\n
The government team that handles PLN's disputes with
\nindependent power producers is made up of five ministers: Finance
\nMinister Bambang Sudibyo; Minister of Mines and Energy Susilo
\nBambang Yudhoyono; Coordinating Minister of Economy, Finance &
\nIndustry Kwik Kian Gie; Minister of Investment & State Enterprise
\nLaksamana Sukardi; and Trade and Industry Minister Yusuf Kalla.<\/p>\n
One of the most publicized contract disputes is PLN's ongoing
\nacrimonious negotiations with PT Paiton Energy on an agreement
\nPLN signed in 1994.<\/p>\n
Paiton Energy is 40 percent owned by Edison Mission of the
\nU.S., with Japan's Mitsui & Co. Ltd. holding 32.5 percent; and
\nGeneral Electric, 12.5 percent. Indonesian firm PT Batu Hitam
\nPerkasa - partly owned by Hashim Djojohadikusumo - has a 15
\npercent stake in Paiton.<\/p>\n
Paiton Energy developed a 1,230-megawatt coal-fired power
\nplant in Probolinggo, East Java. Under the terms of its current
\ncontract with PLN, Paiton sells power to PLN at a price between
\n5.5 cents and 8.5 cents a kilowatt-hour. The average price of
\npower set by other independent power producers in Indonesia is
\nabout 6.4 cents\/KWh, and PLN sells its power at a rate of about 3
\ncents\/KWh.<\/p>\n
Paiton offered to lower its selling price to 3.3 cents\/KWh in
\nOctober 1999, but still couldn't reach a deal with PLN. Local
\nmedia reported last week that Paiton had offered to lower its
\npower price even further, but government officials wouldn't say
\nby how much.<\/p>\n
Endro also declined to comment on the details of PLN's
\nnegotiations with Paiton, saying only that PLN would be using
\n\"international benchmark prices for power from coal-fired plants\"
\nfor its negotiations. \"If the price is far beyond that, then the
\ncontract risk isn't balanced,\" he said.<\/p>\n
He noted that if no solution is reached with Paiton, PLN
\nstands to lose a cumulative US$10 billion by 2002 under the terms
\nof the current contract.<\/p>\n
Endro said \"national collusion\" in the past caused many of the
\nfinancial woes facing PLN today.<\/p>\n
Indonesia's power sector must be \"market driven versus
\ninvestor driven, as it was in the past,\" he said. \"Most of the
\nIPPs under contract were unsolicited. We have to let the market
\ndetermine power purchase deals.\"<\/p>\n
He said the appointment in January of former Indonesian
\nMinister of Mines and Energy Kuntoro Mangskusubroto as PLN
\npresident director sends a strong message to international
\ninvestors that Indonesia is serious about economic reform.<\/p>\n
Kuntoro is seen by the international community as a strong and
\neffective negotiator who is dedicated to reform.<\/p>\n
But Endro cautioned that reforms in the power sector would
\ntake a long time.<\/p>\n
\"In the long term, we are going to achieve full competition.
\nBut before that, we want to create transparency...and
\n(government) partnerships with the private sector,\" Endro said.<\/p>\n
\"We want the private sector to be free to build electric power
\nplants,\" he said. \"But under reform, if you can't compete, you
\nare going to die.\"<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/pln-optimistic-about-contract-compromise-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}