Energy firm says Indonesian power contract guaranteed
Energy firm says Indonesian power contract guaranteed
MELBOURNE (Dow Jones): Australian energy company, Energy Equity Corp., denied yesterday its power purchase agreement with Indonesia's state-owned power company is under threat.
Over the weekend the state power company, Perusahaan Listrick Negara (PLN), unilaterally canceled another company's PPA, raising concerns about EEC's contract.
According to EEC, its contract is protected by government guarantee, even though the former government of President Soeharto has been replaced by a new government headed by President B.J. Habibie.
"The contract is obviously with PLN but we have a government guarantee supporting that contract, whereas a lot of other PPA's don't," EEC's Company Secretary Robert Clarke said.
EEC has a 47.5 percent stake in the US$220 million Sengkang gas and power project in South Sulawesi, which has a U.S. dollar denominated take-or-pay agreement with PLN in which the power company is contracted to buy at least 80 percent of the project's power output. 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 Purnama with 5 percent.
PLN said Saturday that it had unilaterally canceled a power- purchase agreement with PT Cikarang Listrindo, an Indonesian supplier owned by former president Soeharto's cousin.
PLN's president Djiteng Marsudi also told reporters that PLN would cease payments to the Sengkang power plant in South Sulawesi, which is owned by Australia's Energy Equity and El Paso of the U.S.
He said PLN would end the contract despite a contractual take- or-pay clause, requiring it to pay the plant for at least 80 percent of the power it was capable of generating, whether PLN actually used the power or not.
Djiteng said he was pressured by the Soeharto government to sign unfair contracts with power suppliers connected to the Soeharto family, and has threatened to stop payments on some contracts. The PLN is losing money on its U.S. dollar denominated contracts because the steep fall of the rupiah against the U.S. dollar means it's has to pay more for its power.
In Jakarta, Indonesian Mines and Energy minister Kuntoro Mangkusubroto said yesterday he was concerned with both the substance and manner in which the national electricity provider unilaterally canceled a contract with an independent power producer, saying it would ultimately harm foreign investment.
"A contract is a contract," Kuntoro said after a hearing with members of the House of Representatives.
He reiterated however, that he is not going to intervene because the state electricity distributor, PLN, is no longer under his supervision.