Government to pay OPIC claim of $260m

JAKARTA (JP): The government will pay a US$260 million insurance claim lodged by the United States government-owned Overseas Private Investment Corporation (OPIC) from the sales of two power plants, Coordinating Minister for the Economy Rizal Ramli said on Friday.

Rizal said the government would meet the OPIC claim by selling a geothermal power plant in Dieng, Central Java, and one in Patuha, West Java.

"The payment of the claim will stretch out over a long period with the tendering of the geothermal Dieng-Patuha power projects to investors," Rizal was quoted as saying by detik.com on the sidelines of a seminar on the amendment of the central bank law.

OPIC's claim followed state electricity company PT PLN's loss in an arbitration proceeding filed by independent power producer (IPP) MidAmerican Energy Holdings.

The arbitration panel ordered PLN to pay MidAmerican $572 million in compensation after PLN had refused to pay the IPP for power supplies from its Dieng power plant and suspended its Patuha power project.

As PLN was unable to pay, MidAmerican called in its OPIC insurance. OPIC then handed the bill to the Indonesian government.

It is unclear, though, whether MidAmerican has lost its ownership of the Dieng and Patuha projects as a result of the OPIC claim.

MidAmerican and its local partner, Himpurna California Energy Ltd, invested $164 million in the Dieng power plant, which has a capacity of 60 Megawatts.

The Patuha project was valued at $284 million for its 4x55 Megawatt capacity. MidAmerican developed the project with local partner Patuha Power Ltd.

Rizal said the government planned to sell the two projects through a bidding process.

Earlier this year, Minister for Energy and Mineral Resources Purnomo Yusgiantoro said an investor had expressed interest in taking over the OPIC claim in exchange for the ownership of the Dieng-Patuha power projects.

Rizal went on to say that the decision to meet the OPIC claim was solely to maintain Indonesia's good relations with the United States.

"We don't want to confront America on this issue," he said.

The two governments, through PLN and OPIC, had undertaken tough and protracted talks before a deal was reached late last year.

U.S. Ambassador Robert Gelbard had warned that the American government might seize Indonesian assets if the latter refused to pay OPIC claims.

Indonesia initially refused payment, saying it had no money.

A source close to the government told detik.com that the government had decided to accede to OPIC's claim after coming under "pressure".(bkm)