CalEnergy asks to go on with geothermal projects

CalEnergy asks to go on with geothermal projects

JAKARTA (JP): The United States-based CalEnergy Company Inc.
is optimistic that the government will allow it to continue its
geothermal power projects in Patuha, West Java and Bedugul, Bali.

The president and chief operating officer of CalEnergy Asia,
Donald M. O'Shei Jr, told The Jakarta Post last week the company
had asked the government to allow it to continue the projects,
which have been on hold as part of the government's retrenchment
policy to cope with the currency crisis.

He said that he was optimistic that the government would
fulfill the request because the projects were beneficial, needed
by the public and had a strong legal basis to be continued.

"There are many good reasons to be optimistic that all
geothermal power projects, including ours, will be allowed to
continue," O'Shei said.

The power projects which CalEnergy has asked to continue
include three power units at the Patuha power plant -- Patuha 2,
3 and 4, -- which have a combined capacity of 240 megawatts; and
four power units at the Bedugul power plant -- Bedugul 1, 2, 3
and 4 -- which have the combined capacity of 320 megawatts.

The Patuha project is being codeveloped by CalEnergy and
Indonesia's Mahaka Energy, while CalEnergy's partner for the
Bedugul project is Indonesia's PT Pandanwangi Sekartaji, a
subsidiary of the Panutan group.

President Soeharto, in a decree issued on Sept. 20, postponed
and put under review some US$37 billion worth in infrastructure
projects financed by foreign loans to cope with the rupiah's
sharp depreciation against the U.S. dollar.

The decree postponed Patuha units 2, 3 and 4 and Bedugul units
3 and 4, and put under review Patuha Unit 1 and Bedugul units 1
and 2.

However, the decree gave the go-ahead to CalEnergy's 400-
megawatt geothermal power project in Dieng, Central Java.

CalEnergy is developing the Dieng project with its Indonesian
partner PT Himpurna Enersindo Abadi, a company formed by the
retired military association Himpurna.

The President issued another decree on Nov. 1 which allowed
for the continuance of 15 major projects previously reviewed and
postponed, including the 80-megawatt Patuha 1 power unit.

O'Shei believed the government would issue more decrees in the
near future to allow other projects to continue and he was
optimistic over CalEnergy's prospects for its geothermal projects
in Patuha and Bedugul to be included in such decrees.

He said one reason for the optimism was the fact that unlike
coal and gas-fired power plants, contracts for geothermal power
projects provided no legal allowances for delays.

"Geothermal power projects can't be postponed. There is no
legal mechanism for that under the contracts," he said.

Another reason is that geothermal power projects are more
environmentally sound than power plants using fossil fuels, such
as coal and gas, he said.

From the macroeconomic point of view, the development of
geothermal power plants are good for Indonesia's balance of
payments as they could reduce the domestic use of coal, oil or
gas for power generation so that excess fossil fuels could be
exported to create more revenue in dollars, he said.

"We see that the government has been increasingly aware of the
benefits of geothermal power projects and it looks like it will
show more favor to them," O'Shei said.

With regards to the Bedugul project, O'Shei said, Bali very
much needed the project due to potential power distribution
problems from Java to the island.

He said the state-owned electricity company PLN supplies power
from Java to Bali through undersea cables which are prone to
failure due to ocean currents.

"If that (failure in power distribution) happens, Bali will
not have enough power," he said.

O'Shei said CalEnergy had thus far invested $192 million for
the Dieng project, $83 million for the Patuha project, and $20
million for the Bedugul project.

He said the Patuha 1 unit was now under construction and could
come on line in 1999, while the construction of the Patuha 2 unit
could be commenced late this year and the Bedugul project in the
middle of 1998.

O'Shei said the financial closing for all of CalEnergy's
projects in Indonesia had been concluded with Credit Suisse First
Boston as the lead arranger for two syndicated loans worth $560
million. (jsk)