No better deal with power supplier: Minister

Moch. N. Kurniawan, The Jakarta Post, Jakarta

Coordinating Minister for the Economy Dorodjatun Kuntjoro-Jakti said on Wednesday that the government was in no position to pursue a better deal in negotiations with the independent power producers (IPPs) as the country was in dire need of huge amounts of power in the future, and the fact that the country's investment rating was currently low.

Meanwhile, he announced that the government had principally approved the state-owned electricity company PLN's long term agreement with Unocal, the operator of the Salak geothermal power plant in West Java, to purchase the latter's power at 4.45 U.S. cents per kilowatt hour.

The government expected PLN to conclude a final agreement with Unocal in June, which would amend the initial agreement made in 1994 which stated PLN must purchase the power at between 4.9 cents and 8.4 cents.

Dorodjatun said the country badly needed the IPPs as PLN was unable to build new power plants to avoid power blackouts in Java and Bali island in 2004 and 2005, and to supply many other provinces that are very close to running out of power.

He added that the country's current triple C investment rating was no help.

"So, if we reach any agreements with the IPPs, those are the best from the worst. Our effort is already optimal," he said at a hearing session with the House of Representatives Commission VIII on Science, Technology and Environment.

Dorodjatun said the government could allow PLN to seek international arbitration to settle the dispute, but the costs would be more expensive should PLN lose the proceeding.

In the early 1990s, PLN made agreements with 27 IPPs to purchase power from them in a bid to anticipate growing electricity demand.

But the 1997 financial and economic crisis which sent the exchange rate of the rupiah against the U.S. dollar tumbling to record lows, prompted the government to cancel the agreement as PLN was unable to pay the high power rates which were set to the dollar.

PLN has repeatedly said that the contracts were tainted by corruption, collusion and mark up practices during the Soeharto regime.

The government has ordered PLN to renegotiate the contracts, of which some IPPs agreed to do so, but some of them are seeking international arbitration to settle their disputes.

As of January, PLN concluded seven long-term agreements with the Darajat project, Sengkang, Paiton I, Paiton II, Tanjung Jati B, Sengkang, Pare-Pare and Salak.

PLN expects to complete negotiations with the all of the IPPs by the end of 2002.