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)