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