Bribery allegation in Paiton project denied
JAKARTA (JP): Tycoon Hashim Djojohadikusumo denied on Thursday that independent power producer PT Paiton Energy used bribery to secure its controversial power purchase contract with state-owned electricity company PT PLN.
Hashim, who is president commissioner of Paiton, said he was concerned with the audit results of the Development Finance Comptroller (BPKP) which suggested that the company bribed several top government officials and executives of PLN to secure its contract in 1994.
"The report contains a lot of speculation rather than the results of a study based on reality and truth," Hashim said.
In its audit results, the comptroller said former president Soeharto, former mines and energy minister Ginandjar Kartasasmita and IB Sudjana, former PLN president Zuhal could have received bribes from Paiton.
As such, it called on the government to check the bank accounts of those mentioned.
Other people suspected to have received the bribes included former investment minister Sanyoto Sastrowardoyo, former finance minister JB Sumarlin and members of PLN's former team of negotiations for private power projects.
The comptroller said it became suspicious of a possible bribery after noticing in the company's financial report an item called "development cost," which it said was not clearly accounted for by the company. The comptroller labeled the sum as "speedy money," or funds used to secure the contract.
The comptroller has yet to make public the audit results, but copies have been made available to the media over the past two weeks.
The comptroller made the audit at the request of PLN.
Hashim said the so-called development costs were legal and Paiton clearly recorded the use of the money and the names of the companies which received payment.
Paiton's data said that of the US$38.2 million development cost, $23.8 million was paid in fees to 13 legal consultants of the company's shareholders and lenders and another $711,859 to two tax consultants.
Paiton paid another $8.7 million to several banks for their financial advice.
The company also paid $1.28 million in fees to American strategy consultancy firm Kisingger & Assoc., $274,263 to labor consultant Corsavero Pty, $28,050 to information system consultant CSC, $81,216 to coal consultant Marston and $8,615 to Padjadjaran University for an environmental study.
Paiton also paid a total of $3.2 million to six engineering service companies.
The comptroller also said that the price in the contract for the coal supplied by Hashim's company PT Adaro for Paiton's power plant in Paiton, Probolinggo, East Java had been set too high.
It said the price of coal hovered around $22 and $24 per ton over the past three years, compared to $39.76 per ton for Adaro's coal in 1997.
Hashim said the coal price quoted by BPKP was based on free-on-board (FOB) delivery, while the price set in the contract for Adaro's coal was based on the cost-and-freight (C&F delivery).
The $39.76 per ton price also took into account a guarantee from coal company BHP to supply coal for the power plant for 30 years and an obligation from Adaro to always prepare coal stock of 640,000 tons on Laut Island in South Kalimantan, Hashim said.
Paiton's decision to select Adaro as a coal supplier was based on the fact that Adaro produces environmentally clean coal, he added.
Hashim insisted that there were no irregularities in the project, pointing out that the lenders studied the project for 15 months before agreeing on the loan.
Hashim acknowledged that he once sent a letter to Soeharto for assurance that the project may go ahead, but he said he did so because the then mines and energy minister, IB Sudjana, refused to meet him.
Paiton Energy is owned by Japan's Mitsui (32.5 percent), Edison Mission of the United States (40 percent), General Electric, also of the U.S. (12.5 percent) and local firm PT Batu Hitam Perkasa (15 percent), and is controlled by Hashim.
The company has developed a 1,230 Megawatt (MW) coal-fired power plant called Paiton Swasta I in Probolinggo, East Java and it is worth $2.5 billion.
Under the contract, Paiton sells its power to PLN at a price between 5.5 cents and 8.5 cents per kilowatt hour (Kwh). This price is higher than the average of 6.4 cents per Kwh set by other independent power producers and much higher than PLN's selling price of Rp 240 (about 3 cents). (jsk)