Investor ready to take over OPIC bill from PLN

JAKARTA (JP): A foreign investor has offered to take over the Overseas Private Investment Corporation (OPIC)'s US$290 million insurance claim against state electricity company PT PLN in return for the operation of two power plants here, according to the government.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said here on Tuesday the investor wanted to continue the halted operation of two geothermal plants in Dieng, Central Java, and in Patuha, West Java. However, he fell short of identifying the investor.

According to him, the investor has submitted a written proposal to Coordinating Minister for the Economy Rizal Ramli.

"I've only received a copy of a letter saying that an investor is interested in taking over OPIC's claim," Purnomo said following a plenary session of the House of Representatives, during which he presented an oil and gas bill.

The government agreed earlier to pay OPIC's claim, following lengthy negotiations between OPIC and PLN.

OPIC issued the insurance claim against PLN to cover $572 million in losses from independent power producer (IPP) MidAmerican Energy Holding.

The $572 million was compensation MidAmerican should have received from PLN, as ruled by an arbitration panel in 1999.

Because PLN could not afford to make the compensation payment, MidAmerican asked that the claim be paid by OPIC, which paid the company $290 million.

PLN was brought before the arbitration panel because it refused to pay MidAmerican for power supplies from its Dieng power plant, and due to the suspension of its Patuha power project.

It remains unclear whether the claim payment will mean that MidAmerican must hand over its ownership of the two power projects to the government.

Purnomo said PLN's restructuring team had yet to meet and discuss the investor's proposal.

The restructuring team, called the presidential decree 133 team, comprises Rizal, Purnomo, Minister of Foreign Affairs Alwi Shihab and Minister of Finance Prijadi Praptosuhardjo.

"We must hold another meeting to decide on that matter, while also discussing other critical issues surrounding PLN," Purnomo said.

PLN president Kuntoro Mangkusubroto said he had not received a proposal from the investor.

"I've heard about the foreign investor wanting to take over OPIC's claim, but I have not seen any proposals so far," Kuntoro said after a hearing with House Commission VIII for energy and mineral resources.

He said that PLN was waiting for instructions from the government on the matter.

Kuntoro also urged the government to finalize plans to financially restructure PLN.

PLN appealed earlier to the government to take over its short- term debts, totaling Rp 21.5 trillion (about $2.26 billion).

Rizal rejected the appeal and instead ordered PLN to reevaluate the value of its assets.

The asset reevaluation should allow PLN to improve its balance sheet, but the company will have to pay a 10 percent income tax on the additional revenue.

Because PLN would not gain any real income from the asset reevaluation, the income tax would only add to its financial woes.

To date, the government is still unsure whether to exempt PLN from the income tax on its asset reevaluation.

Kuntoro said if PLN was granted a tax-free asset reevaluation, the company could cut its net loss to Rp 4.4 trillion this year from an estimated Rp 20 trillion the previous year.

But if the government agrees to take over its debts without the asset reevaluation, PLN could book a net profit of Rp 2.5 trillion this year, he said.(bkm)