CEPA to continue its power project in Central Java

CEPA to continue its power project in Central Java

JAKARTA (JP): The government has decided to allow PT
Consolidated Electric Power Asia (CEPA) Indonesia to continue the
construction of the 1,300 megawatt (MW) Tanjung Jati B power
plant in Jepara, Central Java, a minister said yesterday.

"The issue is clear now. We have decided to allow CEPA to
continue the construction of the power plant and I hope critics
will stop questioning the project," Minister of Mines and Energy
I.B. Sudjana said in reply to a question by the press on which
company would construct the power project.

Sudjana said that CEPA was apparently hit by an internal
dispute among its investors. Initially, it was a joint venture
between CEPA Ltd of Hong Kong and PT Gunung Sewu Mulya of
Indonesia, but recently PT Impa Energi joined the joint venture
company.

The Ministry of Mines and Energy's Secretary-General Umar Said
said that according to the latest reports he received, there is
no problem with CEPA Indonesia.

"The project's location has been settled and so has its
environmental aspect. Now, it is only the financing that hasn't
yet been settled," he said.

State-owned electricity company PT PLN recently asked for
government approval to cancel its purchasing power agreement with
CEPA.

After PLN's action, a number of companies -- including a
Bakrie-led consortium (PT Bakrie Power Corporation, PT Maharani,
Tomen Co., and Energi Power Group) -- expressed interest in
taking over the power project from CEPA.

PLN's decision to seek government approval to cancel the
agreement was made following CEPA's failure to provide a site for
the coal-fired power plant. Based on a power purchasing agreement
between the two companies in 1994, CEPA must appropriate a
location in 365 days at the latest. The agreement also allowed
CEPA to construct the Tanjung Jati B power plant under a build-
operate-transfer scheme.

Instead of complying with the agreement, CEPA moved the site
from the initially agreed upon location -- Bondo village -- to
Tubanan village, both in Jepara.

According to reliable sources in Jepara, CEPA was apparently
facing problems in land appropriation in Bondo, forcing the
joint-venture company to shift to Tubanan.

The state firm also considered the construction cost of the
power plant -- estimated at US$1.8 billion -- as too high. In
comparison, the Tanjung Jati A steam-powered plant, is being
built by the Bakrie consortium with a similar capacity, is
costing $1.66 billion.

PLN also regarded the price of CEPA's electricity from Tanjung
Jati B, set at $0.0735 per kilowatt hour (KwH), as too expensive.
In comparison, the Sibolga A power plant in North Sumatra is
expected to sell its electricity to PLN at $0.0655 per KwH, while
the Paiton II project in East Java will sell its electricity at
$0.066.

However, Sudjana said yesterday that PLN can still ask CEPA to
lower its electricity price. "PLN can renegotiate the electricity
price and I hope CEPA is willing to lower it," he said.

Last week, CEPA's president, Djan Faridz, announced his
company will complete the construction of the power plant on
schedule in 1998.

He also said his company had reduced the electricity price
from $0.0735 to $0.0645 per KwH at its own initiative. (13)