IPP creditors 'back' renegotiation of PLN's contract

JAKARTA (JP): The group of creditors which provided financing for the country's independent power producers (IPPs) "supports" state-owned electricity company PT PLN's contract renegotiation programs with their clients, PLN said on Thursday.

Calling themselves the Joint Export Credit Agencies (ECA) Mission, the creditors said in a meeting with the firm on Wednesday that they believed the renegotiation program was in the interest of PLN and the producers, PLN's president Adhi Satriya said in a statement.

"We are happy that we could meet with the Joint ECA Mission yesterday (Wednesday). We have discussed at length the way PLN is conducting the rationalization process with the support of the government of Indonesia and the best way to achieve a satisfactory outcome.

"All parties agreed that it is in the interest of both the IPPs and PLN to proceed with the rationalization program as a matter of urgency."

He termed the meeting "fruitful".

The Joint ECA Mission consists of the U.S. Export Import Bank, the Japan Export Import Bank, the U.S. Overseas Private Investment Corporation, Hermes of Germany, the Swiss Export Risk Guarantee Agency and Japan's Ministry of International Trade and Industry.

Adhi said the mission met with Minister of Finance Bambang Subianto on Tuesday.

Bambang is a member of the steering committee formed by President B.J. Habibie last year to supervise the renegotiation program conducted by PLN.

Adhi said Bambang encouraged the group of creditors to establish a positive dialog with PLN, which has the lead role in the negotiation process.

PLN signed power purchase agreements with 24 IPPs, which are mostly joint ventures of international power companies with politically connected businesspeople.

It has sought renegotiation on the contractual terms with the IPPs to ease financial difficulties caused by the monetary crisis which hit the country beginning in mid-1997.

PLN's former president Djiteng Marsudi claimed the state company was under pressure to sign the contracts on disadvantageous terms.

PLN sells its power in rupiah but pays the IPPs for their power supplies in dollars under the contract.

Two IPPs have filed suit against PLN in the international arbitration court over its move.

PLN has lost one lawsuit and was ordered by an international arbitration panel of judges to pay US$572.3 million in damages to MidAmerican Energy Holdings. PLN refuses to pay the damages and has filed a lawsuit at the Central Jakarta District Court to annul the ruling.

PLN said most of the IPPs chose to participate in its renegotiation program rather than resort to litigation.

"PLN is now in the midst of substantial discussions with a significant number of the 24 IPPs, with the broad of multilateral financial institutions like the Asian Development Bank, the World Bank and the International Monetary Fund," Adhi said.(jsk)