CEPA told to set power price below 6.45 U.S. cents

CEPA told to set power price below 6.45 U.S. cents

JAKARTA (JP): State-owned electricity company PLN says it
refuses to buy electricity from PT Consolidated Electric Power
Asia's (CEPA) planned Tanjung Jati B power station if it costs
more than 6.45 U.S. cents per kilowatt hour (kWh).

"A price of 6.45 U.S. cents is still too high. We are asking
CEPA to lower the price further. The price of electricity from
Tanjung Jati B should be at least the same as that of Tanjung
Jati A, which is set at 5.74 cents per kWh," PLN's president,
Djiteng Marsudi, said yesterday.

Speaking to reporters after a hearing of the House of
Representatives' Commission VI for industry, mining, manpower and
investment, Djiteng said that other electricity suppliers could
sell electricity to PLN at lower prices.

Hong Kong-based CEPA recently expressed its willingness to
sell electricity to PLN at 6.45 cents per kWh, which is lower
than the 7.5-cent price agreed by CEPA and PLN in 1994.

PLN and CEPA signed a power purchasing agreement on Sept. 16,
1994 which allows CEPA to build the coal-fired Tanjung Jati B
power plant at Bondo village, Jepara, Central Java, with a
generation capacity of 1,320 megawatts (MW). The agreement
allowed CEPA to develop the plant under a build-operate-transfer
scheme. Based on the agreement, CEPA would sell its electricity
to PLN at 7.50 cents per kWh.

But because of CEPA's dispute with its local partner, PT
Gunung Sewu Mulia, over land acquisition in Bondo, CEPA and its
new local partner, PT Impa Energi, have relocated the power plant
project to Tubanan village, not far from the original site.

Construction of the project was delayed because of the
dispute. PLN then asked the government to cancel its power
purchasing agreement with the Hong Kong firm.

Besides changing the agreed location, PLN claimed that CEPA's
electricity price of 7.5 cents was too high. In comparison, the
Paiton II power plant in East Java is to sell its electricity to
PLN at 6.6 cents, while the Sibolga A power plant in North
Sumatra has set its electricity price at 6.55 cents.

The construction cost of the Tanjung Jati B power plant --
estimated at $1.8 billion -- is said to be too high. By
comparison, the Tanjung Jati A project with a similar generation
capacity, which is to be built by a Bakrie-led consortium, is
expected to cost $1.66 billion.

Moh. Iskandar Mandji, a Commission VI member, quoted analysts
as saying that the construction cost of a coal-fired power plant
in Indonesia should be $1,000 per kilowatt capacity.

"If that assumption is applied to Tanjung Jati B, the 1,320 MW
power plant should cost only $1.32 billion. CEPA's construction
cost of $1.77 billion is $450 million more expensive," Iskandar
said.

Minister of Mines and Energy I.B. Sudjana said last month that
the government had not approved PLN's plan to cancel its power
purchasing agreement with CEPA. He said that PLN must renegotiate
the terms of the agreement, including the price of electricity
and the project's location.

Djiteng said his company and CEPA would meet on Sept. 19 to
discuss the problems hindering the construction of the power
plant, including issues relating to price and location. (13)