Edison finds no payoffs in winning RI contract

Edison finds no payoffs in winning RI contract

ROSEMEAD, California (Bloomberg): Edison International, California's second-largest utility, said on Thursday a company investigation found no improper payments were made to Indonesian government officials to win a sales contract for a US$2.5 billion power-plant project.

The Rosemead, California-based company hired a law firm to interview employees of Edison Mission Energy, its power-plant development unit, to investigate charges of corruption and excessive electricity prices in the Paiton project, the Wall Street Journal reported, citing people familiar with the inquiry.

Edison Mission signed a contract in 1994 to sell power from the plant, which is still under construction, to Indonesia's government-owned utility at rates now under scrutiny because of the country's economic slump.

"A review of these allegations has found no improper payments made to any official of the Indonesian government in connection with the Paiton project by either Edison Mission Energy or by any other owner developer of the project," Edison International said in a statement.

Former President Soeharto resigned last May after 32 years of ruling Indonesia, amid charges of corruption.

Less than a month later, state-run utility PT Perusahaan Listrik Negara (PLN) said the contract to buy power from Edison Mission set prices too high and was signed under pressure from Soeharto.

Soeharto is under investigation for allegedly amassing billions of dollars through illegal contract awards.

Edison never felt pressured to give special favors to Soeharto or his family members and associates to get the contract signed, Edison Mission President Edward Muller said.

"I met Soeharto for the first time on the day we signed the contract," Muller said. "The only pressure that I felt was to drop the price."

Cancellations

In June, PLN canceled contracts to buy power from a company owned by Soeharto's daughter and a unit of El Paso Energy Corp., and from a company owned in part by Unocal Corp.

MidAmerican Energy Holding Co., formerly CalEnergy Co., said in December that it has entered arbitration after the Indonesian government stopped making payments on a similar power-sales contract.

CalEnergy took an $87 million charge in the fourth quarter of 1997 to write off Indonesian investments not covered by insurance.

Edison Mission owns 40 percent of the Paiton project and has spent $300 million on construction. Indonesia's PT Batu Hitam Perkasa owns 15 percent, a unit of General Electric Co. owns 12.5 percent and Japan's Mitsui & Co. owns 32.5 percent.

Edison doesn't expect to take a charge for its investments in Indonesia, and any future profits from the plant haven't been included in earnings estimates, analysts said.

"We're not expecting any meaningful contribution from Indonesia," said Credit Suisse First Boston analyst Paul Patterson, who has a "hold" rating on Edison International. "Any returns on that project will be an unexpected plus."

Edison International shares fell 1/8 to 25 5/8.