U.S. govt agency warns RI on power plant review<\/p>\n
HONG KONG (Dow Jones): A U.S. government agency has warned
\nIndonesia that it may seek to recover as much as US$100 million
\nin lost investment if Indonesia goes ahead with plans to cancel
\nU.S.-backed projects as part of its austerity drive.<\/p>\n
Some U.S. companies say they're ready to invoke political risk
\nguarantees issued by the U.S. government if Indonesia cancels
\ntheir investments. If the U.S. agency pays the claims, it could
\nseek compensation from Indonesia under the provisions of a 1967
\nmutual investment protection treaty, officials say.<\/p>\n
On Jan. 10, Indonesia's President Soeharto, bowing to pressure
\nfrom the International Monetary Fund, said it would 'review' or
\n'postpone,' some 15 infrastructure projects, including several
\ninvolving U.S. investment.<\/p>\n
Days after Soeharto's announcement, the U.S. government's
\nprivate-sector financing and insurance arm, the Overseas Private
\nInvestment Corp., informed Indonesian officials that one of the
\nprojects 'to be reviewed' is a 240-megawatt project partly owned
\nby CalEnergy Co. Ltd. of the U.S. The project is covered by OPIC
\ninsurance, an OPIC spokesman told Dow Jones Newswires late
\nThursday.<\/p>\n
In a Jan. 14 letter to Indonesian government officials, OPIC
\nwarned that if the CalEnergy project is canceled and a claim is
\nfiled with OPIC, OPIC would begin steps to recover the investment
\nfrom the Indonesian government.<\/p>\n
The purpose of such a letter would be to inform Indonesian
\nofficials of the fact that we do have coverage of these
\nprojects,' said the spokesman. 'We let them know that in the
\nevent a claim was made to OPIC, then this is what the process
\nwould be.'<\/p>\n
Under a 1967 mutual investment treaty with the U.S., the
\nIndonesian government is committed to recognize any payments made
\nby the U.S. government to U.S. companies holding U.S.-government
\nissued insurance. If Indonesia doesn't compensate the U.S. for
\nthe payment, the U.S. could seek to recover the money by going
\nthrough binding arbitration.<\/p>\n
The OPIC spokesman added that the recovery process, if ever
\nbegun, would be lengthy and would require that numerous
\nconditions in the OPIC insurance contract be met first.<\/p>\n
OPIC's letter puts it in the awkward position of appearing to
\nbe in conflict with the U.S. Treasury, which has supported
\nIndonesia's agreement with the IMF and its decision to scale back
\nsome of its infrastructure spending plans.<\/p>\n
Robert Silberman, CalEnergy's senior vice president, said that
\nwith the letter, OPIC 'has let the Indonesian government know
\nthey (OPIC) have a real interest in making sure these projects go
\nforward.'<\/p>\n
Silberman added that subsequent contacts by OPIC and the U.S.
\nembassy in Jakarta have continued to press the issue home with
\nIndonesian authorities.<\/p>\n
CalEnergy, which has nearly 2,000 megawatts of power projects
\nin the Philippines and Indonesia, purchased political risk
\ninsurance from OPIC in 1996 for 75 percent of its US$265 million
\nequity investment in two geothermal plants, Dieng and Patuha.<\/p>\n
Once operating, the plants would sell electricity to
\nIndonesia's state-owned utility PT Perusahaan Listrik Negara
\nunder supply contracts guaranteed by Indonesia's Ministry of
\nFinance. OPIC's political risk insurance for CalEnergy covers
\nexpropriation and breach of contract by the host government.<\/p>\n
While the 176-megawatt Dieng project has been allowed to go
\nforward, the 240-MW Patuha plant was put on Indonesia's review
\nlist. The two projects have equal coverage under the OPIC
\ninsurance. The Indonesian government and the World Bank are now
\nevaluating the infrastructure projects to decide whether to
\ncancel the projects or allow them to go forward.<\/p>\n
OPIC's position on the CalEnergy project may mark only the
\nfirst in a possible series of breach of contract claims in
\nIndonesia, where OPIC is financing and insuring $475 million in
\n10 projects.<\/p>\n
In its January letter, OPIC made it clear that besides the
\nCalEnergy project, others with OPIC insurance in Indonesia were
\nalso being carefully monitored.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/us-govt-agency-warns-ri-on-power-plant-review-1447893297",
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"sponsor": "Okusi Associates",
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