Officials air different opinions on CEPA project

Officials air different opinions on CEPA project

JAKARTA (JP): Officials have voiced different opinions over
the government's decision to award PT Consolidated Electric Power
Asia (CEPA) Indonesia the Tanjung Jati C power project in Jepara,
Central Java.

Copies of correspondences made available to The Jakarta Post
reveal that while some officials are for the project, other
officials are against it.

Several days before the project was approved, the coordinating
minister of economy, finance and development supervision, Saleh
Afiff, warned the minister of mines and energy, I.B. Sudjana,
over the excessive foreign loans required by private power
companies which had signed power purchase agreements with state-
electricity company PLN.

In his letter dated Aug. 7, Afiff did not mention the Tanjung
Jati C project but he said private power developers that had
signed power purchase agreements with PLN needed a total of
US$9.28 billion foreign credit, far more than the $6.9 billion
ceiling set by the government.

Afiff cautioned Sudjana that signing more power purchase
agreements amid the current monetary difficulties would encourage
a further increase in foreign loans.

The power purchase agreement is the final step private power
companies need to begin projects.

CEPA was awarded the new project on the back of a letter of
recommendation from Minister/State Secretary Moerdiono dated Aug.
14.

Golkar legislator Fransiskus Skera recently told a hearing
with the House of Representatives and Sudjana that he found it
strange that a new project had been awarded on the back of a
letter of recommendation Moerdiono.

"It looks unusual because the responsibility over the
electricity sector is supposed to rest with the Minister of Mines
and Energy," Skera said.

The Tanjung Jati C project was given to CEPA in return for its
willingness to lower the price of power from its first project,
Tanjung Jati B, also in Jepara.

The pricing scheme of Tanjung Jati B's power has created
controversy because the power purchase agreement between CEPA and
PLN, which was signed last October, set the power price at 6.45
U.S. cents a kilowatt hour (KWh).

House members criticized the accord, demanding CEPA reduce the
price to 5.74 cents, which is the level offered by the nearby
Tanjung Jati A power plant.

The Tanjung Jati A plant is being developed by a consortium,
which includes the Bakrie Group.

The director general of electricity and energy development,
Endro Utomo Notodisuryo, followed up Moerdiono's letter by
granting a preliminary letter of approval to CEPA to develop the
Tanjung Jati C power plant with a capacity of 1,320 MW.

The Tanjung Jati C power project will be situated near the
Tanjung Jati B power plant and also have a capacity of 1,320 MW.

Together the projects are worth $3.54 billion and have a
capacity of 2,640 MW.

Endro said in his letter to Sudjana, dated Aug. 22, that he
had given letter of preliminary approval to CEPA to offer
electricity at 5.73 U.S. cents per KWh for Tanjung Jati B and C.

But Endro recently said the price was still negotiable despite
being set in the letter of preliminary approval.

Oversupply

PLN's president Djiteng Marsudi indicated in his letter to
Sudjana, dated Aug. 9 -- five days before Moerdiono sent his
letter of recommendation to Sudjana -- that the Tanjung Jati C
power project was not needed because the Java-Bali power grid
would have enough supply until 2003.

He said PLN would increase its capacity to 16,427 MW in 2003
from 12,400 MW now.

The 17 private power plants which have signed power purchase
agreements with PLN will make 8,305 MW in 2003 and another six
power plants which have been given letter of preliminary approval
will generate 2,400 MW that year.

He said total power supply on the Java-Bali power grid would
reach 27,132 MW, while peak load on the grid would increase to
21,340 MW from 9,640 MW now on the basis of 12.5 percent growth a
year.

"Thus, according to our opinion, the capacity of private power
plants and PLN's power plants already on design is in principle
enough," Djiteng said in his letter.

Djiteng said developing the Tanjung Jati C project would be
feasible only if the operation of one of the existing power
projects was delayed.

But Djiteng recently said PLN accepted the government's
decision and would negotiate with CEPA so that PLN's
subsidiaries, either PT Pembangkit Listrik Jawa Bali I (PJB I) or
PJB II, had a stake in the power project.

Golkar legislator Iskandar Mandji called on the government
over the weekend to revoke its approval for the Tanjung Jati C
power plant because it would cause an oversupply of power on the
Java-Bali power grid from 2003.

According to power purchase agreements, PLN had to prioritize
the distribution of private electricity supply over its own power
even though privately supplied power was more expensive than
power from PLN, Mandji said.

"Thus, it is the public who will burden the cost of power
oversupply because PLN should buy most of the power generated by
the private companies," he said.

Mandji said he regrets lack of coordination among officials in
dealing with the Tanjung Jati C project.

"The approval of the Tanjung Jati C project is in conflict
with the letter of Minister Saleh Afiff which warned over the
excessive credit for power projects," he said. (jsk)