Energy Equity believes RI will repay debt

Energy Equity believes RI will repay debt

MELBOURNE (Dow Jones): Australian power company Energy Equity Corp. said on Monday it believes the Indonesian government will meet its payment obligations to the company's 47.5 percent-owned Sengkang gas and power project in south Sulawesi.

Sengkang is in dispute with the government over a U.S. dollar denominated take-or-pay agreement under which the state power company, Perusahaan Listrick Negara, is contracted to buy at least 80 percent of the project's power output.

However in the wake of a substantial drop in the value of the Indonesian rupiah against the U.S. dollar, PLN's payment requirements have risen sharply. In response, since March last year PLN has only made partial payments at a rate of Rp 2,450 for every U.S. dollar owed, compared to a current exchange rate around Rp 8,590 to the dollar.

In April Sengkang demanded that the Ministry of Finance honor its letter of guarantee and cause PLN to discharge its payment obligations under the terms of the power purchase agreement.

"EEC believes that the loans to and the investment in the Sengkang Gas and Power Project are fully recoverable and that the Government of Indonesia through the (Ministry of Finance) will cause PLN to meet its payment obligations," EEC said in a statement.

EEC is joined in the project by U.S. power company El Paso Energy Corp. (EPG) with 47.5 percent and Indonesia's PT Trihasra Sarana Jaya Prnama with 5 percent.