Government to talks with OPIC over controversial deal

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)