OPIC rejects government's proposal on US$290m claim

OPIC rejects government's proposal on US$290m claim

JAKARTA (JP): Overseas Private Investment Corps. (OPIC), an
insurance arm of the U.S. government, rejected the Indonesian
government's proposal to use the Paris Club scheme in paying
OPIC's insurance claim worth US$290 million, state electricity
firm PT PLN has said.

PLN president Kuntoro Mangkusubroto said on Tuesday thus far
OPIC had refused the Paris Club terms of payment because they
were "not advantageous."

"We're still waiting for some input (from the government) to
start renegotiations with OPIC on the payment mechanism," Kuntoro
told reporters in a press meeting.

He said he hoped PLN and OPIC could start renegotiations next
month.

PLN had said earlier that the government agreed on paying
OPIC's claim worth $290 million but wanted to pay it only under
the Paris Club scheme.

Asked whether other options were available aside from the
Paris Club scheme, Kuntoro answered: "The Paris Club mechanism is
the most preferable for us."

Indonesia received approval from the Paris Club, a club of
creditor nations, to reschedule $5.8 billion in sovereign debts.
Under the Paris Club agreement, the government could pay the debt
in 20 years, including a grace period of four years, with an
interest rate of one percentage point above the rate set by the
U.S. Federal Reserve.

OPIC demanded payment from PLN after the state company failed
to pay independent power producer (IPP) MidAmerican Energy
Holding $572 million in compensation as ordered by an independent
arbitration panel.

In September 1998, MidAmerican filed arbitration proceedings
against PLN because the government suspended the MidAmerican
power plant project in Patuha, West Java and PLN refused to pay
MidAmerican for power supplies from its geothermal power plant in
Dieng, Central Java.

In 1999, PLN lost the arbitration proceedings and was ordered
to pay MidAmerican $572 million in compensation.

But PLN refused to pay, forcing MidAmerican to call on its
OPIC insurance.

PLN, however, fell short of explaining why OPIC's claim on the
government was only $290 million instead of $572 million.

During Tuesday's press briefing, Kuntoro further said that PLN
wanted to hold international tenders for two projects tainted by
corruption.

He was referring to the power transmission projects in Kediri,
East Java and Tasikmalaya in West Java, which allegedly were
tainted with markup practices.

"For PLN, I very much hope we can conduct open and
international tenders," he said.

He said only international tenders could stave off
manipulation attempts that PLN had been accused of practicing.

"PLN will soon consult the government on this problem to
arrive at the best solution," Kuntoro said in a press statement.

According to him, the power transmission projects in Kediri
and Tasikmalaya cost the government respectively 283 percent and
315 percent more than a similar project in Depok.

But former PLN chief Djiteng Marsudi, who signed the contracts
for the projects in 1998, denied the markup allegations.

Djiteng said when PLN put up the two projects for tender in
1997, prices were much higher because contractors back than had
many choices of projects.

The two projects are still awaiting construction, PLN said.

Kuntoro said holding international tenders would set back the
projects' schedules by eight months.

He then warned that PLN could no longer delay the construction
of the Kediri power transmission project. (bkm)