CalEnergy protests project cancellation

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)