CalEnergy protests project cancellation
JAKARTA (JP): The United States giant power company CalEnergy International protested yesterday the government's latest decision to put on hold its power project in Patuha, West Java.
"CalEnergy International and Patuha Power are gravely disappointed with the lack of transparency in the government process review (which leads to putting on hold the Patuha power project)," chief operating officer of CalEnergy Asia Donald M. O'Shei said in a statement sent to The Jakarta Post yesterday.
The 80 Megawatt (MW) geothermal Patuha 1 power project was among the eight projects placed under review by the presidential decree announced by Minister/State Secretary Moerdiono over the weekend. The decree also canceled again seven other big projects.
The 15 projects have been given the go-ahead by a presidential decree issued on Nov. 1 last year.
Moerdiono said Saturday that the government had intended to continue with the projects but after another review, it was learned that they required huge financing that could undermine the government's efforts to deal with the monetary crisis.
CalEnergy had signed a contract with the state-owned electricity company to develop four geothermal power units at Patuha -- which are known as Patuha Unit 1, 2, 3, 4 -- with the combined capacity of 240 MW.
The Patuha Unit 2, 3, and 4 were postponed by the Sept. 20, 1997 presidential decree.
Aside from the Patuha power project, CalEnergy has also signed contracts to develop geothermal power plants in Dieng, Central Java and Bedugul, Bali.
CalEnergy sets up Patuha Power with its Indonesian partner PT Mahaka Energy to develop the project, where CalEnergy holds the majority of the shares.
O'Shei said CalEnergy and its partner could not accept the government's decision to place the Patuha power project under review again because the project's financing had been closed and the construction had been going on for six months and was scheduled to come on line in 1999.
According to O'Shei, Patuha Power had spent US$136 million for the construction and financing of the Patuha power project.
O'Shei also noted that CalEnergy had been allowed to continue its Patuha Unit 1 project by the November 1997 presidential decree not because of nepotism or personal connections with its local partner, Mahaka Energy.
Mahaka Energy "is not a large conglomerate or connected by nepotism to controlling Indonesians. Negotiations of the energy sales contract with PLN was a transparent and arms length transaction involving multiple parties over two and a half years," he said.
Many of the 15 projects which were given the go-ahead by the November 1997 presidential decree are controlled or partly owned by President Soeharto's children and friends.
O'Shei said if the government put the 15 projects on hold to prevent more foreign borrowing, the Patuha Unit 1 should not be excluded from the 15 projects because the project's financing had been closed.
"The loan for Patuha Unit 1 was closed and funds distributed by the consortium of international lenders (led by Credit Suisse First Boston) in August of last year. No further loans will need to be arranged for Patuha 1," he said.
He also warned the Indonesian government that the project carried insurance against violation of contracts, backed by the U.S. government.
"If violations of legal obligations of the parties cause a claim under the insurance, the U.S. government will be entitled to reimbursement from the Republic of Indonesia," he said. (jsk)