El Paso upbeat on negotiations with PLN
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)