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)