Paiton concerned over union lawsuit

JAKARTA (JP): Independent power producer (IPP) PT Paiton Energy voiced on Wednesday concerns over the lawsuit against the company filed by the workers of state electricity company PT PLN, saying the action would undermine its ongoing contractual negotiations with the state company.

The company said in a statement it and PLN had been making progress in the negotiations on the changes of the power purchase agreement (PPA) signed by both companies in 1994.

"It is very sad that this action will only slow the significant progress of Paiton Energy's and PLN's negotiations.

"This lawsuit is without merit and the false allegations made only confuse the public and cause irreparable damage to the image of Indonesia, which in turn delays successful economic recovery," company president Ronald P. Landry said.

On Tuesday, the trade union of PLN's workers filed a lawsuit with the Central Jakarta District Court, urging the court to annul the contract between the company and PLN, which the union claimed "flawed" because it set too high a price for Paiton's power supplies.

Union chairman Hasrin Hutabarat, who claimed to represent PLN's 54,000 workers said the 1994 contract violated the existing regulation, which requires power transactions be made in rupiah rather than dollars, and that it would inflict US$560 million in losses on PLN.

Under the 30-year PPA, PLN has to buy power from Paiton at the price of 8.4 US cents per kilowatt hour (kwh) for the first six years of operation. The price will gradually decrease to 5.4 cents.

Paiton, which is owned by General Electric Capital Corporation of the United States, Mitsui and Co Ltd of Japan and Indonesian firm PT Batu Hitam Perkasa, has built a 1,230 megawatt (MW) coal- fired power plant in Probolinggo, East Java.

PLN has signed PPAs with 27 IPPs, including Paiton Energy, under which the state company has to buy their power supplies in dollars and resell them to the public in rupiah.

The rupiah's sharp depreciation against the dollar boosted the relative price of power supplies from IPPs, forcing PLN to ask for renegotiation of its contracts with them.

Today, PLN sells its power at an average price of Rp 240 (2.2 cents) per kwh.

Landry said Paiton, concerned with PLN's financial difficulties, has been selling its power to PLN over the past two years at a price much lower than the one set in the contract.

He said today under the interim agreement with PLN, Paiton sells its power at 3.5 cents per kwh.

"Paiton Energy and PLN are currently operating under the first phase of a long term agreement. Under this agreement, Paiton Energy provides electricity to PLN at a per-kilowatt cost below PLN's current costs to produce power.

"PLN's annual financial statements indicate that PLN's cost to produce its own electricity is 5.6 cents per kilowatt hour," Landry said. (jsk)