Government to pay OPIC claim of $260m

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)