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)