Government renegotiates IPP contracts
Government renegotiates IPP contracts
Fitri Wulandari, The Jakarta Post, Jakarta
The government has completed renegotiations with 26
independent power producers (IPP), raising optimism that there
will be no power crisis in the future.
"With the completion of the renegotiations with the IPP, we
are ready to move forward. There will be no more power crises
next year as some of the IPP projects will enter the stream,"
Coordinating Minister for the Economy Dorodjatun Kuntjoro-jakti
said in a hearing with House of Representatives Commission VIII
for energy, environment and science and technology.
Dorodjatun said the dispute with Karaha Bodas Company is the
only case left to settle.
"The case is still under litigation by the legal
representative of the Indonesian government and Pertamina. An out
of court settlement is being pursued by a facilitation team,"
Dorodjatun added, referring to the state oil and gas company
Pertamina.
Known as Tim Keppres 133, after the Presidential Decree No.
133/2001 issued to establish the team, the team was tasked to
renegotiate power purchase agreements (PPA) signed by state
electricity company PLN and 27 IPPs prior to the economic crisis.
The government put on hold many of the projects in late 1997
as part of the retrenchment program to cope with the economic
crisis. PLN, which was financially troubled by the crisis, asked
to renegotiate the PPAs, especially with regards the price.
Following the postponement of the project, some of the IPPs
decided to file arbitration proceedings against PLN, Pertamina
and the government, while others were willing to renegotiate the
contracts.
PLN's president Eddie Widiono said PLN would save more than
US$5.5 billion in costs thanks to the contractual renegotiations.
Of the 26 IPPs, 14 IPPs agreed to continue their projects
under a new pricing scheme, while seven agreed to terminate the
PPAs. The government and PLN each agreed to take over two
projects, while Pertamina took over one project. The 26 IPPs have
a combined power generation capacity of 10,615 megawatt.
As for the seven terminated PPAs, Eddie said, the government
is likely to offer them to new investors.
Of the 14 IPPs, who agreed to resume their projects, seven
projects are still in process and are scheduled to be finished by
2006/2007. The seven are Amurang power plant, Sibolga, Sibayak,
Asahan, Paiton I, Paiton II and Sengkang.
According to Eddie, most of the 14 IPPs have agreed to sell
their power at an average of 4.6 U.S. cents per kilowatt per hour
(KwH) except for the diesel fired Pare-pare power plant in
Makassar at 5.7 U.S. cents and Paiton at 4.9 U.S. cents.
Eddie did not disclose why Paiton would sell at a higher price
for its power supply but in the case of the Pare-pare power
plant, Eddie said the price was higher because it used diesel
fuel.
"Diesel is more expensive than other types of fuel," he said.
Legislator Priyo Budisantoso of the Golkar party praised the
completion of the renegotiation, while voicing concern that the
new power price agreed upon with the IPPs were still higher than
that of other Southeast Asian countries.
"It (the new price) is still not competitive. But it is better
than the initial 8 U.S. cents per KwH. Thus, we appreciate the
effort," he said.
Status of 27 IPPs
Name Contract status
1. Darajat Continued
2. Tanjung Jati A Terminated
3. Tanjung Jati C Terminated
4. Cilacap Terminated
5. Serang Terminated
6. Cilegon Terminated
7. Pasuruan Terminated
8. Paiton 1 Continued
9. Paiton 2 Continued
10. Pare-pare Continued
11. Sengkang Continued
12. Tanjung Jati B Continued
13. Salak Continued
14. Amurang Continued
15. Sibolga Continued
16. Palembang Timur Continued
17. Cikarang Continued
18. Asahan Continued
19 Sibayak Continued
20. Bedugul Continued
21. Cibuni acquired by PLN
22. Wayang Windu acquired by Pertamina
23. Sarulla acquired by PLN
24. Dieng acquired by government
25. Patuha acquired by government
26. Kamojang terminated
27. Karaha Bodas Under legal dispute