Final tenders for three power plants project approved

Final tenders for three power plants project approved

JAKARTA (JP): The government, after tough negotiations for
half a year, has finally reached agreement with three consortia
on the pricing of three major power projects planned to be
established in Java at a total cost of US$1.67 billion.

"The new bidding prices reflect a 22-percent decline from
$2.14 billion offered by the consortia in their first proposal to
the state-owned electricity company PLN on Feb. 15," Coordinating
Minister for Economy and Finance Saleh Afiff briefed some 50
reporters at his office here yesterday.

Minister of Mines and Energy Ida Bagus Sudjana was present at
yesterday's briefing, which was also attended by Secretary
General of the Ministry of Mines and Energy Umar Said, Director
General for Electricity and New Energy Artono Arismunandar, PLN's
president, Zuhal, and PLN's director for financial affairs,
Ruswito.

Saleh said that in its final offer on June 30, a consortium of
Asea Brown Boveri (ABB) of Switzerland and Marubeni Corp. of
Japan agreed to reduce its bidding price to $733.3 million for
construction of the 982-megawatt (MW) Muara Tawar combined-cycle
power project in West Java, as compared to $912.1 million it
offered on April 26.

On the same date, the consortium of Japanese Sumitomo and
American General Electric proposed a cost of $372 million for the
establishment of a 505-MW combined-cycle power generation plant
in Tambak Lorok of Semarang, Central Java, as compared to the
previous offer of $394 million.

"A group of Japan's Mitsubishi and German Siemens, meanwhile,
offered a cost of $571.1 million for construction of a combined-
cycle power generation plant with a capacity of 855 MW in Grati,
East Java," he said. Previously, the Japanese-German consortium
proposed a $617.4-million cost for the Grati project, he added.

Repeat-order

The three projects, which will be set up under a repeat-order
basis, were in limbo for half a year since it was offered to the
consortia last November. Their offered prices in fact sparked
long debates among business leaders and members of the House of
Representatives (DPR), most of whom came in conclusion that the
prices proposed by the consortia were too excessive.

Saleh himself asked PLN some months ago to review the prices
offered by the consortia because they were "still too high", as
compared to those in neighbor countries.

President Soeharto even instructed PLN in February to open a
bidding for the three projects if the consortia were not ready to
lower their prices.

On Feb. 26, the ABB-Marubeni consortium offered its price of
$744 million for the Muara Tawar project, down from its first
offer of $912.1 million on Feb. 15, the Sumitomo-General Electric
group offered $395 million for the Tambak Lorok plant, down from
$473.7 million and Mitsubishi-Siemens consortium offered $630
million for Grati project from $761.2 million.

Capacity

Saleh said that during negotiations between the government and
the ABB-Marubeni executives, the consortium was even committed to
increasing the capacity of the planned Muara Tawar plant to
1,094.5 MW from the original plan of 982 MW.

"The Muara Tawar project will be even equipped with a new main
electricity machine, which was not included in the previous
offer," he said.

Zuhal, meanwhile, assured that the ABB-Marubeni consortium has
agreed to give three years in guarantee for the operation of the
machine. An informed source close to the consortium told The
Jakarta Post that the machine, called the 13E2 gas turbine
machine, will be assembled in Germany.

Saleh argued: "If we calculate the total investment offered by
the three consortia with the inclusion of the additional capacity
offered by the ABB-Marubeni consortium, the planned deals are 25
percent lower than the first offer of $540.6 million."

Zuhal said the newly-approved prices are relatively lower than
those offered for the construction of similar power plants in
Malaysia and Thailand.

Both Saleh and Zuhal said that differences of prices in
foreign countries, among others, laid on their exclusion of local
components, risk factors, terms of payment and cooling system
requirements.

With the approval of the government, Zuhal said, PLN is now
preparing to sign the three contracts. "We expect that we can
sign the contracts in August," he said.

He added that the construction of the open-cycle power plants
in Muara Tawar, Tambak Lorok and Grati will be completed within
17 months from the date of signing, while the construction of
their combined-cycle facilities will take 14 months after the
completion of the open-cycle plants. (fhp)