Edison investigating its Indonesian power project
Edison investigating its Indonesian power project
NEW YORK (Dow Jones): Edison International has launched an internal investigation into its US$2.5 billion power-plant project in Indonesia, which has been plagued by charges of corruption and excessive electricity tariffs, according to people familiar with the inquiry.
They said the Los Angeles-based law firm of Munger, Tolles & Olson has been conducting interviews with past and present employees of Edison's independent power-plant unit, Edison Mission Energy, about the Indonesia project.
The inquiry comes as Edison, of Rosemead, California, is in negotiations with the Indonesian government over its contract with the state-owned electric utility that had agreed to buy power from the plant.
The Paiton power plant, located outside of East Java, is Edison's biggest independent power project, and was the first large-scale private project for Indonesia. The plant, 40 percent owned by Edison, is scheduled to start generating electricity within a few months.
Indonesia's economic crisis has thrown into question how much Edison will get paid for the electricity -- or whether Edison will get paid at all.
Edison signed a long-term contract in 1994 with government- owned electric utility PT PLN, which agreed to pay more than eight cents a kilowatt hour for the electricity. The government now has told Edison it can't pay that rate.
Edison's inquiry is focusing, at least in part, on the structuring of this electricity tariff, now under scrutiny because it is much higher than other tariffs in the country.
The lawyers also have been asking questions about the structuring of a carried-interest loan from Edison to an Indonesia company, PT Batu Hitam Perkasa, which is owned by a relative of former president Soeharto by marriage and a close family friend. The loan gave a 15 percent stake in the project to PT Batu without investing any cash, according to Edison officials and project-related documents.
Edison owns 40 percent of the power project, and has invested more than $300 million in capital to date, the company said.
General Electric Capital has a 12.5 percent interest, and Mitsui & Co. of Japan owns 33 percent.
Edward Muller, president and chief executive of Edison Mission Energy, said Edison made a proposal late last year for restructuring the power-purchase contract that is "attractive for us and the Indonesia government." He declined to comment on the work of Munger, Tolles & Olson. "I have no intention of discussing this law firm's work or nonwork on any matter," Mr. Muller said. He said he doesn't know how the Indonesia project, once expected to be a cash cow for the company, will affect earnings, but added that Edison won't be taking a charge on the project.
Former U.S. Secretary of State Warren Christopher, who sits on Edison's board and consulted on the projected early on, also has been negotiating with the government, Edison officials said.
Meanwhile, another company involved in major power projects in Indonesia, CalEnergy Co., is in arbitration over one project, people familiar with those negotiations said. Edison said it hasn't yet filed for arbitration.