Paiton asks PLN to return to power negotiations
JAKARTA (JP): Independent power producer PT Paiton Energy asked state electricity company PT PLN on Monday to resume negotiations to settle the dispute over their power purchase contract and to drop both parties' plans to seek a legal solution to the dispute.
Paiton's chief executive officer and president Ronald Landry said his company would drop its plan to file an arbitration lawsuit against the state company provided that the latter withdrew its lawsuit filed against the former at the Central Jakarta court.
"We hope that PLN will withdraw its lawsuit, then we can withdraw our notice of arbitration, and the parties can engage in constructive negotiations," Landry said in a statement.
But PLN said on Monday it would not withdraw the lawsuit.
The state company noted however that both parties could resume negotiations while the trial of the case was in progress.
"Under Indonesian law, negotiations are still allowable while the suit is undergoing the processes of the court," PLN said in a statement.
PLN filed a lawsuit against Paiton at the Central Jakarta court on Thursday to nullify the 30-year power purchase agreement (PPA) signed by the previous management of the state company in 1994, under the allegedly corrupt administration of former president Soeharto.
Adhi Satrya, PLN's president, described on Thursday the PPA as "unlawful, unfair and not transparent" and, as such, the court should declare the contract "void and non enforceable".
In response to PLN's action, Paiton gave notice to PLN on Friday that it would file an arbitration lawsuit to preserve the sanctity of its PPA, and to protect the interest of its shareholders,lenders and credit support providers.
Adhi said the lawsuit was the last option taken by PLN after failing to persuade to Paiton to change the "unfair" terms of the contract, including reducing the price of its power in negotiations over the past seven months.
Paiton Energy is owned by Japan's Mitsui (32.5 percent), Edison Mission of the United States (40 percent), General Electric, also of the U.S. (12.5 percent) and local firm PT Batu Hitam Perkasa (15 percent), controlled by tycoon Hashim Djojohadikusumo.
The company has developed a 1,230 Megawatt (MW) coal-fired power plant, called Paiton Swasta I, in Probolinggo, East Java.
Adhi said PLN had evidence of corrupt practices conducted when the contract was being awarded.
PLN offered to renegotiate all the 27 PPAs signed by its previous management to ease its financial burden following the sharp downfall of the rupiah against the dollar.
Under the PPAs, PLN has to buy power in dollars, but it sells the power to the public in rupiah.
Paiton sells its power to PLN for 8.5 US cents per kilowatt hour (kWh) for the first to sixth years, and the price will progressively fall to 5.5 cents for the 13th to 30th years.
Landry said Paiton had in fact offered significant concessions to PLN in an effort to reach an interim agreement during the negotiations, before PLN abandoned the negotiation and decided to pursue litigation.
He said Paiton had been ready to cut the price of coal to Rp 173,800 (around $23) per ton as demanded by PLN. Paiton would be supplied with coal by PT Adaro Indonesia, which is partly owned by Hashim.
Landry did not state the price of coal under the contract but PLN's data said the price was $34.9 per ton.
He also said Paiton had agreed to accept payments from PLN for outstanding invoices at the rate of Rp 2,450 per dollar for operating costs and interest payments to lenders, until a long- term approach could be developed.
"Together, these provisions mean that we agreed to an interim price of 3.3 cents per kWh," Landry said.
But, in a statement on Monday Adhi said all information provided by Landry was wrong.
"Paiton Energy, as opposed to what it said to the press, had among others never proposed an 'interim price' of 3.3 cents per kWh, never offered to meet the specific price of coal at Rp 173,800 per ton which was what PT Adaro Indonesia offered to PLN recently.
"We want also to emphasize that the negotiations with Paiton never got to the stage of 'excellent progress towards a commercial solution," Adhi said.
Adhi accused Paiton of attempting to "undermine the interest of the Indonesian people with its own wishes to obtain an inappropriate project cost and tariff", by releasing wrong facts to the public.
"PLN expresses its unwillingness to engage in a polemic and invites Paiton to address the subject in the district court of Central Jakarta or on the negotiation table as long as it is prepared to participate in a credible discussion," Adhi added. (jsk)