Kuntoro denies PLN to opt for force majeure
JAKARTA (JP): Minister of Mines and Energy Kuntoro Mangkusubroto denied on Tuesday that state electricity company PT PLN plans to declare force majeure in contracts with its independent power producers (IPP).
Kuntoro said the cross-ministerial team formed on Sept. 11 by President B.J. Habibie to restructure and rehabilitate PLN had not yet finished formulating a common approach to settling the dispute between PLN and 26 IPPs with which it has signed power purchase agreements (PPA).
"Hopefully, (we can finish formulating the approach) in two weeks," Kuntoro said after delivering a speech at a business luncheon here.
The cross-ministerial team is headed by Coordinating Minister for Development Supervision and State Administrative Reforms Hartarto Hadisoemarto. Kuntoro heads the subcommittee responsible for renegotiating PLN's contracts.
Earlier, PLN president Adhi Satriya was quoted by The Jakarta Post as saying last week that PLN planned to issue the 26 IPPs with force majeure notices given the companies financial problems.
However, when answering a question raised during the business luncheon, Kuntoro said Adhi's tongue must have slipped, or that he had been misinterpreted by the press.
When asked if the cross-ministerial team would rule out the force majeure option in dealing with IPPs, Kuntoro said, "I can't make any statement on that because all measures (in dealing with IPPs) should first be agreed upon the other ministers in the team."
In a related development, PLN's spokesman Maryono said in a press release that Adhi had not yet declared force majeure in the companies contracts with IPPs.
"For the moment, PLN is carefully studying the power purchase agreements that have been signed to find out if the current monetary crisis could be considered to be a force majeure. The study is being conducted by lawyers hired by PLN," Adhi was quoted by Maryono as saying.
"The legal opinion that will be given by the lawyers should be generally applicable," he added.
He said that a force majeure claim would only be valid if both parties tied in contract agreed upon the claim. If one party disagreed with the claim, the case would have to be taken to court.
PLN has received a force majeure claim from Hong Kong-based IPP Hopewell in relation to its 1,320 Megawatt (MW) coal fired Tanjung Jati B (TJB) power plant project in Central Java.
The claim provides the basis for Hopewell to suspend development of the US$1.7 billion power plant.
"The background to this notice is that current circumstances in Indonesia have led to a loss of confidence amongst financiers and potential financiers of the project," Hopewell chairman Gordon Wu said.
Adhi said PLN is studying the claim and has yet to make any response.
Analysts have long urged PLN to declare force majeure in its contracts with IPPs, but the company is reluctant to do so for several reasons.
Most contracts with independent power producers include a force majeure which covers the IPP's interests, but not a reciprocal clause regarding PLN's interests.
The 26 independent power producers are mostly joint ventures formed between international power companies and the children and cronies of former president Soeharto. Most contracts were awarded without a competitive tender. (jsk)