Court turns down lawsuit against Paiton

Court turns down lawsuit against Paiton

The Jakarta Post, Jakarta

Central Jakarta District Court has dismissed a lawsuit filed
by state electricity company PT PLN's labor union against
independent power producer PT Paiton Energy and PLN's former
president Kuntoro Mangkusubroto.

Paiton confirmed the court ruling, which was issued at the
court session on Wednesday.

The court ruled that the labor union was not authorized to
bring such action.

"We are pleased with the Central Jakarta District Court's
decision. Our view has been that it is for Paiton Energy and PLN
to resolve through commercial negotiations the issues concerning
the Paiton I project," Paiton president Ronald P. Landry said in
a statement.

The lawsuit filed by the labor union in April last year, in
which the union charged that the power purchase agreement (PPA)
signed by Paiton and PLN in 1994 had violated the Constitution
and Law No. 15/1985 on electricity, which stipulates that a PPA
should not financially burden the public and the price for power
in the PPA should be set in rupiah.

They also said the PPA set too high a price for Paiton's power
and inflicted some US$590 million in losses on PLN.

Under the 1994 PPA, the price for power supplies from Paiton
was set above 8 U.S. cents per kilowatt hour (Kwh), higher than
the price offered by other IPPs, according to the union.

The union also sued Kuntoro on charges of corruption.

Kuntoro, who headed PLN from early 2000 to 2001, withdrew the
lawsuit filed by its predecessor Adhi Satrya in 1999 against
Paiton. Adhi then sued Paiton to pressure the company to lower
its power price.

The union accused Kuntoro of colluding with Paiton.

After years of negotiations, PLN and Paiton last year reached
an interim agreement for the new price of Paiton's power. Under
the new pricing scheme, PLN will buy Paiton's power at 4.93 cents
per Kwh.

Paiton is owned by subsidiaries of Edison Mission Energy of
the United States, Mitsui & Co. Ltd. of Japan, General Electric
Capital Corporation of the U.S. and local firm PT Batu Hitam
Perkasa.