Hopewell suspends RI power project

Hopewell suspends RI power project

HONG KONG (AFP): Hong Kong-based Hopewell Holdings Ltd. said Wednesday it had suspended a huge power project in Indonesia which may require it to make a provision of as much as US$420 million.

It is the second setback faced by the infrastructure firm in Southeast Asia due to the regional financial crisis after the shelving of an elevated railway project in Thailand.

In a statement, Hopewell said it had issued a Force Majeure notice in relation to the Tanjung Jati B (TJB) power project in central Java, Indonesia, on which construction began in 1996.

A Force Majeure is an event outside the control of either party to a contract that may excuse it from fulfilling its obligations, and the notice was served to Indonesian state-owned power company PLN.

Hopewell chairman Gordon Wu said the notice had been issued to safeguard Hopewell's investment in Indonesia, which is battling a severe financial crisis.

"The background to this notice is that current circumstances in Indonesia have led to a loss of confidence amongst financiers and/or potential financiers to the TJB project..," the company statement said.

The Hong Kong-based firm has an 80-percent stake in the project, and has incurred costs of about HK$4.8 billion (US$420 million) to date.

"The Board is currently considering making provisions against such costs. The amount of provisions is still being finalized and will be announced as soon as possible," the company statement added.

Hopewell said it would not make any further material contribution to the TJB project because it was not currently known how long the events of Force Majeure were likely to last.

Wu, however, said: "I believe the contract can be successfully completed and we will continue to work closely with the Indonesian parties to enable work on the project to resume as soon as possible."

Hopewell's board believes the project will be successfully completed once it receives renewed support and commitment from financiers.

The power project is a 1,320 megawatt coal-fired power plant awarded on a build-own-operate basis. Hopewell has the right to operate the plant for 30 years.

Hopewell said the project originally scheduled for completion in 2000 was 70 percent complete.

The suspension was another blow to Hopewell following a stalled elevated railway project in Bangkok.