Paiton asks PLN to return to power negotiations

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)