Jakarta court puts an end to Paiton lawsuit

Jakarta court puts an end to Paiton lawsuit

JAKARTA (JP): The Central Jakarta District Court decided on
Thursday to end the legal process of the dispute between state-
owned electricity company PT PLN and independent power producer
PT Paiton Energy at the request of the state company.

"We have submitted a mandate from PLN to revoke the lawsuit
that we had filed against Paiton in court. The panel of judges
approved our request at today's hearing," Maqdir Ismail of Adnan
Buyung Nasution & Partners law firm told The Jakarta Post.

Maqdir said the court's decision automatically annuls all
previous provisional rulings made by the court, including the one
that barred Paiton from pursuing arbitration litigation against
the state company.

Maqdir called on Paiton to reciprocate PLN's move by also
dropping its arbitration litigation.

"To be fair, Paiton also has to put an end to its arbitration
efforts. Thus far, we have not yet heard if Paiton has made such
a move," Maqdir said.

Paiton lawyer Frans Hendra Winarta told the Post Paiton had
notified new PLN president Kuntoro Mangkusubroto that it was
committed to seek a commercial solution to their dispute and
would thus terminate its arbitration efforts.

"Paiton notified the new PLN leadership about its plan to drop
the arbitration lawsuit several days ago. I have copies of the
letter. But for the sake of confidentiality, I can't give them to
you," Frans said.

"The arbitration suit will undermine the commercial
negotiations that Paiton is committed to do with PLN," Frans
said.

Frans also reiterated Paiton's commitment to cut the price of
its power supplies to PLN.

PLN filed a lawsuit against Paiton in October last year
following months of unproductive negotiations on changes to the
power purchase agreement (PPA) which was signed in 1994.

PLN asked the court to nullify the contract, saying it was
void ab initio (void from the beginning), invalid and based on
the corruption, collusion and nepotism practices associated with
the administration of former president Soeharto.

It said the high price for Paiton's power supplies set in the
contract reflected the corrupt practices.

Paiton Energy is owned by Japan's Mitsui (32.5 percent),
Edison Mission of the United States (40 percent), General
Electric, also of the U.S. (12.5 percent) and local firm PT Batu
Hitam Perkasa (15 percent), which is controlled by tycoon Hashim
Djojohadikusumo.

The company developed a 1,230 Megawatt (MW) coal-fired power
plant, called Paiton Swasta I, in Probolinggo, East Java.

Under the contract, Paiton sells its power to PLN at the price
of between 5.5 cents and 8.5 cents per kilowatt hour (Kwh), which
is higher than the average price of 6.4 cents per Kwh set by
other independent power producers and much higher than PLN's
selling price of Rp 240 (about 3 cents).

Paiton filed an arbitration suit in Stockholm soon after PLN
filed its suit in the Central Jakarta court, but delayed the
arbitration efforts after the court ordered it to stop pursuing
them.

President Abdurrahman Wahid ordered PLN to drop the
arbitration suit this month, insisting that his administration
would honor Paiton's contract and all other contracts made by
previous governments.

The President said he preferred an out-of-court negotiation to
change the contents of the contracts rather than reaching a legal
solution.

Then president of PLN Adhi Satriya resigned in protest over
Abdurrahman's policy. He was then replaced by former mines and
energy minister Kuntoro Mangkusubroto. (jsk)