PT Paiton secures $1.82b deal for East Java project<\/p>\n
JAKARTA (JP): Indonesia's infrastructure privatization drive
\nhas received a major boost as the country's first major private
\npower project, owned by PT Paiton Energy Company (PEC), closed an
\noffshore-syndicated financing deal worth US$1.82 billion.<\/p>\n
\"This agreement is a landmark step for Indonesia,
\ndemonstrating the confidence of the international financial
\ncommunity, not only in the economy as a whole, but in the
\nprivatization of the nation's infrastructure,\" said Hashim
\nDjodjohadikusumo, PEC's chief commissioner.<\/p>\n
Hashim made the remark in a company press release issued after
\nthe final agreement on the project's financing scheme was signed
\nin New York last week.<\/p>\n
PEC controls a 1,230 megawatt coal-fired power plant in East
\nJava. The project, worth $2.5 billion and known as Paiton Private
\nPower I, is scheduled to start commercial production by 1998.<\/p>\n
Ground was broken in September at Probolinggo, an East
\nJavanese city close to the project site, for the first phase of
\nthe plant.<\/p>\n
PEC is comprised of a consortium consisting of Mitsui Co. of
\nJapan (with 32.5 percent), General Electric Corporation (20
\npercent) and Mission Energy Company (32.5 percent) of the United
\nStates and Indonesia's PT Batu Hitam Perkasa controlled by Hashim
\n(15 percent).<\/p>\n
The state electricity company, PT PLN, has signed a 30-year
\npower purchasing contract with PEC, which will charge 8.56 US
\ncents per kilowatt hour for the first six years, 8.41 cents for
\nthe next six years and 5.54 cents for the final 18 years.<\/p>\n
In other words, PEC's tariff structure has an average purchase
\nprice of 8.37 cents at 1998 prices.<\/p>\n
Sidharta Martoredjo, a director of PEC, told The Jakarta Post
\nyesterday that, within Paiton's financing scheme, The Export-
\nImport Bank of both the United States and Japan will provide a
\ncombined loan of $1.44 billion.<\/p>\n
The U.S. government-backed Overseas Private Investment Corp.
\nwill provide a further $200 million, he said.<\/p>\n
Tough<\/p>\n
Sidharta, a partner in Batu Hitam, said that the two Exim
\nBanks had never cooperated before to finance an infrastructure
\nproject.<\/p>\n
\"This is why the negotiations have been so tough. Our biggest
\nlenders had never previously been involved in a private
\ninfrastructure deal,\" he said.<\/p>\n
\"The creditors initially insisted on additional government
\nguarantees...but we managed to convince them and met the final
\ndeadline on April 21st,\" he said .<\/p>\n
Sidharta said that the residual $180 million loan would be
\nextended by eight multinational commercial banks: Chase
\nManhattan, Bank of America, Industrial Bank of Japan, Fuji Bank,
\nSakura Bank, Union Bank of Switzerland, Barclays Bank of the
\nUnited Kingdom and Credit Lyonnais of France.<\/p>\n
\"The remaining $680 million will come from PEC's equity
\ninvestments,\" he added.<\/p>\n
The Indonesian government is planing to build seven power
\nstations with a total capacity of 2,600 megawatts starting this
\nyear.<\/p>\n
The proposed projects are part of the government's plan to add
\naround 30,000 megawatts to the national power supply by 1999, at
\nan estimated cost of $8 billion.<\/p>\n
Other projects<\/p>\n
The government, in the meantime, has awarded two other major
\nprivate power projects which are expected to generate 1,600
\nmegawatts in total at a total investment of $2.6 billion.<\/p>\n
The larger of the two new ventures went to the Jawa Power
\nConsortium, which will build a 1,200 megawatt coal-fired power
\ngeneration plant worth about $2.1 billion, known as Paiton
\nPrivate Power Project II, near the site of the PEC plant in
\nPaiton, East Java.<\/p>\n
Jawa Power is comprised of Siemens AG of Germany (controlling
\n50 percent), PowerGen of Great Britain (35 percent) and
\nIndonesia's Bimantara Group (15 percent).<\/p>\n
Once operation has commenced in 1999, Jawa Power's average
\npower price is expected to reach about 6.4 US cents per kilowatt
\nhour.<\/p>\n
The other private power project, a 400 megawatt coal-fired
\ngenerator in West Java worth about $500 million, went to a
\nconsortium made of Italy's Ansaldo, North Resources Group of the
\nU.S., and Indonesia's Kiani Tujuh Dua, which is controlled by
\ntimber baron Mohammad Hasan.<\/p>\n
This consortium is expected to sell their power at an average
\ntariff of 6.1 US cents per kilowatt hour.<\/p>\n
Sidharta Martoredjo of PEC said yesterday that the latter
\nprojects could afford to charge lower rates because they were
\nlate-comers to the private power industry.<\/p>\n
\"We have to charge a higher rate because we are the pioneers,\"
\nhe said.<\/p>\n
In the meantime, economist Mari Pangestu warned yesterday that
\nprivate power tariffs must be determined in a transparent manner.<\/p>\n
\"A higher electricity price is, of course, important to create
\nincentives for private power investors...but the rates must be
\ndecided openly so that the consumers are also protected,\" she
\ntold the Post.<\/p>\n
Mari also called for continued government vigilance on
\ninflation which, she said, could result from higher power costs.
\n(hdj)<\/p>",
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