Influence brokers inflate prices of electricity plants
Influence brokers inflate prices of electricity plants
JAKARTA (JP): The involvement of lobbyists and brokers in
negotiations for the construction of three power projects in Java
has caused contractors to charge high prices, the president of
the State Electricity Company (PLN), Zuhal, says.
He bluntly told members of the House of Representatives (DPR)
in a hearing here yesterday that brokers and lobbyists with
strong political ties had intervened in the bid evaluation
process, forcing foreign contractors to increase their asking
prices by up to US$2.14 billion.
"The decision making process was like a long chain, in which
lobbyists and brokers tried to influence every step of the
evaluation process," he said.
But Zuhal declined to identify the lobbyists and brokers.
"PLN has persistently bargained for and demanded that
contractors give rock bottom prices," he said.
He added that after the contracts were awarded to the three
foreign contractors on a repeat-order basis in March they agreed
to reduce their prices to $1.76 billion and further cut them down
in April to $1.65 billion.
The 982-megawatt (MW) Muara Tawar combined-cycle (steam and
gas) power project in West Java was awarded to a consortium of
German ABB and Japanese Marubeni, the 505-megawatt Tambak Lorok
one-cycle project in Central Java to Japan's Sumitomo and
America's General Electric and the 855-megawatt Grati combined-
cycle power project in East Java to a consortium including
Mitsubishi and Germany's Siemens.
Fair prices
Zuhal said that the latest prices submitted by the contractors
seemed to be fair, given the tight requirements imposed on them
such as the minimum 25-percent local content for the jobs and the
turn-key system set for the projects.
However, the repeat order set off a controversy because an
Anglo-French company, GEC Alsthom, claimed it could complete the
three projects for much less.
A fact finding team sent by the Ministry of Mines and Energy
last month to Malaysia and Thailand to conduct price-comparison
studies did find out that the contractors' prices for the Java
power projects were indeed much higher.
The contractors' prices ranged from $610 to $701 per kW for
combined-cycle (steam and gas) power generation, compared to
$489-502 in Thailand and $597-599 in Malaysia.
Their prices for open-cycle (gas only) power generation ranged
from $529 to $534 per kilowatt (KW), as against $424-510 in
Thailand and $372-493 in Malaysia.
But Zuhal defended the repeat order, saying that the three
projects should be constructed immediately to cope with the
severe power shortage.
He said that PLN had to increase its installed generation
capacity by 9,522 MW during the current sixth five year plan
period (1994-1999). Its installed capacity is now 13,290 MW. (09)