Kuntoro confident of resolving PLN's problems

JAKARTA (JP): Kuntoro Mangkusubroto, the new president of state electricity company PT PLN, pledged on Wednesday to settle the lingering disputes between the state company and independent power producers (IPPs) and to cut the price of power supplies from the latter.

"I am convinced that we shall be able to resolve the dispute in a way that satisfies all parties, including PLN or the government, the IPPs and the public," the former Minister of Mines and Energy told reporters after being installed to the new office in a ceremony at the State Ministry of State Enterprises.

Kuntoro said that under his leadership, in line with the government's policy, PLN will honor all the power purchase contracts signed with the IPPs by PLN's previous management.

He was optimistic that the IPPs would be willing to renegotiate contractual terms, including cutting their power prices, as they were aware that PLN could not afford the power prices as set in the contracts due to the hardships caused by the financial crisis.

The IPPs were also aware that PLN and the government had goodwill to keep them from going bankrupt, Kuntoro explained.

"If other countries could get cheap power supplies, why not us?" Kuntoro said.

When asked whether he would probe the IPPs' corrupt practices as a form of pressure during contract negotiations, Kuntoro said: "I will only handle the commercial aspects of the contracts. The criminal aspects will be handled by the attorney general."

The installment ceremony was presided over by state minister of State Enterprises Development and Investment Laksamana Sukardi and attended by Minister of Foreign Affairs Alwi Shihab, Minister of Mines and Energy Susilo Bambang Yudhoyono, and State Minister of Public Works Rozik Beodioro Soetjipto.

Kuntoro was installed to replace Adhi Satriya who tendered his resignation late last month in protest over President Abdurrahman Wahid's handling of a dispute with PT Paiton Energy, an IPP.

Abdurrahman ordered PLN to drop the suit against Paiton, claiming that the suit damaged the country's investment climate.

PLN filed the suit in the Central Jakarta court charging that Paiton received its power purchase contract from PLN's previous administration through corrupt practices.

PLN signed power purchase agreements (PPAs) with 27 IPPs, which are mostly international power companies in partnership with the family members and cronies of former President Soeharto.

Most of the PPAs were awarded without competitive bidding.

PLN has been seeking to renegotiate contractual terms for about two years due to financial difficulties caused by the sharp depreciation of the rupiah against the dollar. The power prices set in the PPAs are quoted in dollars.

Three IPPs have filed arbitration litigation in reaction to PLN's move.

Laksamana and Bambang said the appointment of Kuntoro indicated the strong commitment of Abdurrahman to resolve PLN's matters.

Laksamana said Kuntoro was charged with a special mission to formulate and review PLN's strategic policy; to resolve all PLN's problems, including its dispute with IPPs; and to improve PLN's organization and finance.

Both Laksamana and Susilo said Kuntoro was the right choice to lead PLN. Laksamana elaborated that he believed that under the leadership of Kuntoro, who is known for his negotiating skills, PLN would be better negotiate with IPPs.

"With Kuntoro as PLN's president, the economic ministers will be much relieved. As such, they can concentrate on other matters," Laksamana said.

Several analysts posited that Wahid appointed Kuntoro under pressure from foreign countries, including the United States, as foreign investors feel comfortable with his liberal point of view.

Laksamana said Kuntoro would not take a liberal approach in solving PLN's problems -- he would have to follow the guidelines set by the interministerial team.

He also dismissed the allegation that IPPs will feel comfortable negotiating with PLN under Kuntoro's leadership.

"In my opinion, the IPPs now tremble over the appointment of Kuntoro as PLN's president as they know his negotiation skills," Laksamana said.

A controversial but respected figure, Kuntoro, a graduate of Stanford University in the U.S, is well known as a strong and stubborn negotiator. (jsk/03/prb)