Govt completes contract renegotiation with 19 IPPs

Govt completes contract renegotiation with 19 IPPs

A'an Suryana, The Jakarta Post, Jakarta

The government has completed power purchase contract
renegotiations with 19 independent power producers (IPPs),
progress that will help ease the financial burden of state-owned
electricity company PLN in meeting greater electricity demand in
the future.

PLN president Eddie Widiono said Wednesday that it was hoped
that renegotiations with seven other IPPs would be completed by
the middle of the year.

"But one contract is still in limbo, namely the Karaha Bodas
geothermal power plant, which remains in litigation," Eddie said
during a hearing between the government and the House of
Representatives Commission VIII on mining and energy.

The government team is led by Coordinating Minister for the
Economy Dorodjatun Kuntjoro-Jakti.

PLN signed power purchase contracts with 27 IPPs in the early
1990s during the rule of president Soeharto to avoid a power
crisis in the future.

Many said the power purchase prices were too expensive. The
financial and economic crisis which hit in 1997 further weakened
the ability of PLN to meet the contracts, and sent the company to
the brink of bankruptcy.

The government then suspended the IPP contracts and moved to
renegotiate them.

Eddie said the renegotiated contracts covered power plants
that could produce a combined capacity of 9,885 Mega Watts (MWs),
or around 91 percent of the total capacity produced by the 27
IPPs.

The seven contracts currently being renegotiated by the
government are the Tanjung Jati A power plant project, Tanjung
Jati C, the Cilacap plant, Serang plant, Pasuruan plant, Cilegon
plant and Kamojang plant.

Meanwhile, the Karaha Boda project is in limbo following years
of legal dispute between its contractor and the state-owned oil
and gas company Pertamina.

Eddie did not disclose details of the renegotiated contracts,
including the final price PLN must pay for the power produced by
the IPPs.

But he said that for the Tanjung Jati B coal-fired power
plant, it had been agreed that the price would be 4 U.S. cents
per kWh over 20 years.

But Eddie said that most of the contracts ended up with a
price level of below 5 U.S. cents per kWh, compared to the
previous price levels of more than 7 cents per kWh.

This should benefit PLN as the company was selling its
electricity at Rp 488 or 5.42 cents per kWh.

In an earlier report, a PLN official claimed the contract
renegotiations were able to cut PLN's losses by US$5 billion.

PLN has been operating at a loss since the monetary crisis hit
in 1997. Last year PLN booked financial losses of around Rp 4.47
trillion.

List of renegotiated contracts

1. Drajat power plant
2. Paiton I
3. Paiton II
4. Sengkang
5. Tanjung Jati B
6. Pare-pare
7. Salak
8. Amurang
9. Sibolga
10. Palembang Timur
11. Cikarang
12. Asahan
13. Sibayak
14. Cibuni
15. Wayang Windu
16. Sarulla
17. Dieng
18. Patuha
19. Bedugul