El Paso upbeat on negotiations with PLN
JAKARTA (JP): El Paso Energy International of the United States is optimistic that its subsidiary PT Energy Sengkang and the state electricity company Perusahaan Listrik Negara (PLN) will be able to settle a dispute over their power purchase agreement.
El Paso president John D. Hushon said here Monday evening negotiations over the terms of payment between Energy Sengkang and PLN were progressing and that he was optimistic the talks would bear fruit in the coming weeks.
"We are cautiously optimistic there will be solution to this matter in four to six weeks," Hushon said.
He said Energy Sengkang understood PLN was unable to fully pay for its power due to the economic crisis and that it would take a flexible stance in its payment negotiations with the state-owned power company.
"We understand that circumstances in Indonesia today are such that we must be flexible in working out an arrangement so we can adjust to the reality where we are," Hushon said.
PLN has refused to pay for the power it has been buying from Energy Sengkang at the current exchange rate as stipulated by their power purchase agreement.
PLN has unilaterally set the exchange rate at the pre-crisis level of Rp 2,450 per dollar, due to severe financial losses.
The power purchase agreement is based in U.S. dollars, while the majority of PLN's revenue is in rupiah.
The sharp fall in the rupiah's value against the greenback since July last year has caused an increase in power prices in rupiah terms by over 300 percent.
PLN suffered a Rp 334 billion loss in the second half of 1997 and projects a Rp 1.3 trillion loss this year due to the ongoing economic crisis.
PLN has signed power purchase agreements with 26 independent power producers, but only two of them, including Sengkang, are currently producing power. The other 24 producers have yet to finish construction of their facilities.
The other producer currently operating is PT Daya Bumi Salak Pratama, controlled by the Unocal Corp. of the United States. The company operates a 165-megawatt (MW) geothermal power plant at Mt. Salak, West Java.
El Paso owns 47.5 percent of Energy Sengkang. Australia's Energy Equity owns an equal 47.5 percent share of the company, while 5 percent is controlled by Trihasra Sarana Jaya Purnama, headed by President Soeharto's daughter Siti Hardiyanti Rukmana.
Energy Sengkang operates a 135-MW gas-fired combined cycle power plant in Sengkang, South Sulawesi, which came on line last October.
Hushon said Energy Sengkang and PLN started negotiations eight weeks ago, but that they were still inconclusive.
He said PLN proposed buying power from the company at a rate of Rp 5,000 per dollar, but that Energy Sengkang said it could only accept the rate if it was close to the market rate.
"If PLN pays at the rate of Rp 5,000, and the rate is close to the market rate, we can survive and we can deal with that," Hushon said.
Minister of Mines and Energy I.B. Sudjana has said previously the government has set up a task force involving several ministers to handle the dispute between PLN and the power producers.
Sudjana indicated the government might provide PLN with financial help to enable it to buy power at the exchange rate set by the independent producers.
"In principle, we never want to make investors suffer losses. We shall never break the power purchase agreements we have signed... We are looking for a solution which will at least prevent investors from suffering losses and make them still able to operate," he said.
Secretary-General of the Ministry of Mines and Energy Darmoko Slamet, who is vice chairman of the task force, has said the task force had asked the Ministry of Finance to provide PLN a subsidy to pay for its power. The ministry has yet to reply to the request. (jsk)