Government to talks with OPIC over controversial deal

JAKARTA (JP): The government is currently still in talks with U.S. government-owned insurance firm Overseas Private Investment Corp. (OPIC) over a controversial payment agreement signed last month by former finance minister Rizal Ramli, according to president of the state-owned electricity company PLN Eddie Widiono.

But Eddie did not clearly said whether the "talk" was meant to renegotiate the settlement deal.

"Now, PLN and the government legal team is talking with the OPIC legal team about this (the settlement agreement)," he told reporters on the sideline of an informal meeting between the ministry and associations of the mining industry.

He declined to provide further details.

Rizal signed an agreement with OPIC last month to pay some US$260 million in compensation for the government's past decision to cancel power projects in West Java and Central Java.

The agreement followed a ruling by an arbitration panel ordering the government to pay OPIC some $572 million in compensation. But OPIC later agreed to cut down the compensation demand to around $260 million.

OPIC provides insurance for U.S. power company MidAmerican Energy Holdings, which develops the Dieng and Patuha power plants in Central Java and West Java.

But the agreement signed by Rizal became a controversy not only because he made the deal at a time when newly-elected President Megawati Soekarnoputri had already put the cabinet team at the time in a non-active status, but also because the agreement deviated from the initial government proposal, and would inflict great losses to the country particularly because of the higher interest rate and the link to the Paris Club deal, according to earlier reports quoting sources.

The government is seeking a debt rescheduling facility from the Paris Club of creditor nations over some $2.8 billion in sovereign debt maturing this year.

According to the agreement signed by Rizal, if the government fails to reach a rescheduling deal with the Paris Club, OPIC had the rights to demand Indonesia to accelerate the payment of its obligation.

There has been growing pressure for the government to renegotiate the agreement. Top government officials have been tightlipped over the issue.

Separately, Minister of Energy and Mineral Resources Purnomo Yusgiantoro urged PLN to start the operation of the 60 megawatt Dieng geothermal.

"There is an idle 60 megawatt (mw) power plant in Dieng. We want the plant to be operated as soon as possible to raise money and then to pay OPIC," Purnomo told reporters.

Purnomo said, in the medium to long term, he wanted the Dieng power plant to be expanded to a total of 180 MW, and to build another 160 MW plant in Patuha.

"This expansion we believe will make the power plants economically sound business," he said.

He added that the expansion plan would require approximately a fresh investment of about $300 million, which would be raised either from the current operator PLN and state oil and gas company or from new investor.

Dieng and Patuha are among the 27 IPPs the government had signed contracts with to meet rising power demands in early nineties.

But the economic crisis in 1997, which left PLN financially crippled forced the government to renegotiate most of the IPPs contracts.

The government is seeking to cancel contracts of power projects that have not begun construction yet, and renegotiate payment conditions for the power supplies from those that are already operating.(Iwa)