El Paso to open regional headquarters in Jakarta

JAKARTA (JP): American power giant El Paso Energy International has chosen Indonesia for the site of its Southeast Asian regional headquarters despite the country's economic uncertainties.

Company president John D. Hushon said here last Monday the decision to open the regional headquarters in Jakarta was made in the third quarter of last year.

The new headquarters office would be officially opened in the next few weeks, he said.

"We are now inaugurating this office to indicate our major and continuing commitment to Indonesia and we will be operating a number of our other international projects in Southeast Asia from Jakarta," Hushon said.

Hushon said El Paso chose Indonesia as its regional base in view of the country's huge economic potential.

EL Paso was aware of the economic crisis currently facing the country but the company was convinced that the country would be able to overcome its problems, Hushon said.

"I and David (David Veiseh, company chief representative in Indonesia) are consciously optimistic that six months from now we'll look back and smile and say 'We are glad we stayed'" Hushon said.

El Paso, based in Houston, bills itself as the world's largest natural gas handling company.

It is active in 11 countries, distributing and processing natural gases as well as operating gas-fired power plants. It currently operates power plants throughout the world with a total generation capacity of 4,000 Megawatts (MW).

According to Veiseh, El Paso has invested about $200 million in Indonesia to develop the 135-MW combined cycle power plant in Sengkang, South Sulawesi, and a number of small hydropower projects -- popularly called minihydros.

El Paso owns a 47.5 percent stake in PT Energy Sengkang which operates the Sengkang power plant, with its partner Energy Equity of Australia holding 47.5 percent and PT Trihasra Sarana Jaya Purnama of Indonesia 5 percent.

Energy Sengkang is the first of the 26 independent power producers that have signed power purchase agreements with the state electricity company PLN to come on stream. It began operating last September.

Hushon said El Paso had allocated $500 million to build power plants in Indonesia over the next four years but the realization of the investment plan depended on the consistency in the country's power policy.

"We initially put investment in Indonesia on top priority but we later put it on the second priority after seeing the recent development in the country's power policy," Hushon said.

Energy Sengkang is at present arguing with PLN over terms of payment and PLN's desire to change the terms of the power purchase agreement (PPA), which is based in dollars.

PLN buys power from Energy Sengkang at the pre-crisis conversion rate of Rp 2,450 (27 US cents) per dollar, instead of the current exchange rate as stipulated on the PPA. The rupiah closed at Rp 8,800 against the U.S. dollar on Friday, slightly up from Thursday's close of Rp 9,000.

PLN also wants to reduce the price of power and the volume of power it has to buy, as stipulated in the PPA.

Under the PPA, PLN has to buy 80 percent of the Sengkang power plant's capacity at $6.70 per kilowatt hour.

PLN says the current economic crisis has slashed its income so much that it cannot afford power at the current exchange rate.

Hushon said negotiations between Energy Sengkang and PLN were in progress and he was optimistic that the talks would bring results agreeable to Energy Sengkang. (jsk)