Bakrie offers Tanjung Jati A project to PLN

JAKARTA (JP): Local conglomerate Bakrie Group offered on Tuesday its Tanjung Jati A power plant project in Jepara, Central Java, to be bought out by state-owned electricity company PT Perusahaan Listrik Negara (PLN) for US$1.05 billion.

The company said in a statement its power plant project was cheaper than the Tanjung Jati B power plant which PLN planned to buy out for $1.15 billion using a Japanese loan.

As such, the company said, it would be more profitable for PLN to buy out its plant than Tanjung Jati B.

"Ironically, PLN does not eye Tanjung Jati A despite its lower price," the company said in a statement.

Bakrie made the statement following reports that the government had asked for loans under the Japanese Yen Loan scheme for PLN to buy out the Tanjung Jati B power plant.

PT HI Power Tubanan I, which owns the project, put on hold the project last year due to a lack of financing.

The coal-fired Tanjung Jati A and B power plants are located adjacent to each other in Jepara with a similar generation capacity of 1,320 Megawatts (MW).

Tanjung Jati A is 20 percent owned by Bakrie Power and 20 percent by Maharani Paramitra, which is controlled by former president Soeharto's second eldest daughter, Siti Hediati Herijadi Prabowo. The remaining 60 percent of shares are equally held by Britain's National Power and Japan's Tomen Power.

Tanjung Jati B is owned by Hopewell Holdings Ltd. of Hong Kong, with a 20 percent share held by PT Impa Energy, owned by Jan Farid, a businessman with links to Soeharto's eldest daughter, Siti Hardiyanti Rukmana.

Several analysts and legislators, who initially misunderstood PLN would use loans under the Miyazawa Plan to finance the buyout, lambasted the intention, calling on the government and PLN to cancel the plan.

The government clarified the misunderstanding, saying that the loan was part of the soft loan provided by the Japanese government under the Japanese Yen Loan to finance infrastructure projects in crisis-hit Asian countries, including Indonesia.

The loan carries an interest rate of between 0.75 percent and 1 percent with a grace period of 10 years and maturity of 40 years.

Only projects where Japanese companies are heavily involved are eligible for the loan.

Tanjung Jati B was constructed by Japanese construction firm Sumitomo using equipment supplied by Japanese firms Mitsui and Toshiba.

Bakrie noted the power purchase agreements signed by PLN and the independent power producers (IPP) did not contain any clause obliging PLN to buy out the latter's power projects.

He said the government or an IPP could buy out a power plant from an IPP in a state of urgency, meaning the country needed additional power supplies in the near future. In fact, he said, the country would experience a power glut in the next several years amid the economic crisis.

Bakrie also said if PLN or the government wanted to buy out any power plants, they should buy the cheapest one.

As such, PLN should prioritize buying out Tanjung Jati A over Tanjung Jati B, he said.

Aside from having the lowest price of all the 27 IPPs, Tanjung Jati A was also known as the only power project which was put on tender, Bakrie said.

"Tanjung Jati A, which is the only power project awarded through a transparent bidding, sells power to PLN for 5.74 U.S. cents per kilowatt hour (kwh).

"Tanjung Jati B, which was awarded without competitive bidding to a consortium of local and foreign companies, sells power to PLN for 6.45 cents per kwh," Bakrie said.

Other IPPs sell power to PLN for between 6.2 cents and 8.4 cents per kwh, compared with PLN's selling price of about 2.5 cents per kwh.

Bakrie said by buying out Tanjung Jati A, PLN would be able to cut the price of power supplied from the power plant to 1.9 cents per kwh.

In comparison, the company said, PLN would cut the price of power supplied from Tanjung Jati B to 2.3 cents per kwh, if it buys out the power project. (jsk)