CEPA quits

CEPA quits Tanjung Jati power project

HONG KONG (Reuter): Southern Co Inc's Consolidated Electric Power Asia Ltd (CEPA) decided to quit the Tanjung Jati power station project in Indonesia because of uncertainty over the contract terms, CEPA said on Wednesday.

Southern Co and Hopewell Holdings Ltd said earlier that Hopewell, CEPA's former parent, would sell its remaining 20 percent stake in CEPA in return for CEPA's 80 percent interest in the central Java power project and US$150 million in cash.

"We were feeling a little queasiness about the project," CEPA managing director Raymond Hill told Reuters in an interview.

The company was about to make a major payment under the contract, and while bank financing was in place, little progress had been made on concluding certain contract terms, Hill said.

In particular, CEPA and its Indonesian partner PT Perusahaan Listrik Negara (PLN), the Indonesian state-owned electricity corporation, had failed to confirm the electricity tariff that the power plant would charge, said Hill.

Hopewell, through its minority shareholding in CEPA, had a much lower exposure to the uncertainties of the deal and was prepared to continue, Hill said. "There was a clear difference of views between the two shareholders," he said. "The solution is basically as you see it."

New York-listed Southern Co Inc, through subsidiary Southern Electric International Inc, bought about 40 percent of CEPA from Hopewell in January 1997 and acquired another 40 percent in a general offer at HK$18.50 per share.

The latest deal was also valued at about HK$18.50 per CEPA share, and analysts said Hopewell got a good price, above the power producer's estimated net asset value.

"I think it is a good price. He (Hopewell chairman Gordon Wu) sold the shares at a premium to CEPA's NAV," said analyst Terry Yip at BZW Securities Asia. "So there should be no regrets from Hopewell."

Southern's CEPA is also happy with the price and the end of uncertainties.

"We are buying income producing assets with it," said Hill. "This is healthy for Southern's overall financial position. It reduces the risk and advances the cash we get out of it."

CEPA's contribution to Southern, currently estimated to be less than five percent of net income in 1997, will begin to take off in 2000 when CEPA's Sual project in the Philippines comes on line, said Hill.

CEPA's strategy will continue to be widely focused in Asia in the coming years.

The company is aiming to increase its investment in the Philippines, revitalize Southern's connections in China, chiefly a power plant project in partnership with Huaneng International Power Co and continue to pursue CEPA negotiations in Pakistan, India and Bangladesh.

"My biggest management problem is that I have more interesting projects than I have manpower to send to handle them," said Hill.