Paiton deal may improve investor confidence

The Jakarta Post, Washington

U.S.-ASEAN Business Council president Ernest Z. Bower says the successful debt restructuring of power producer PT Paiton Energy will send a positive signal to foreign investors in the country.

"The treatment of existing investors is crucial to Indonesia's ability to attract future investment," Bower said in a statement issued on Wednesday.

"Indonesia has taken proactive steps to address its long- standing energy supply problems, which gives investors and markets greater confidence as a result. The importance of this settlement cannot be overstated."

Bower said the deal would provide fresh momentum for U.S.- Indonesia bilateral energy talks, which have not been held for several years.

The restructuring deal was announced last week.

As part of the debt restructuring, the Export Import Bank of the United States (USEXIM) would provide a US$381 million direct loan to Paiton's power project.

USEXIM, along with the Japanese Bank for International Cooperation, Nippon Export and Investment Insurance of Japan and the U.S, Overseas Private Investment Cooperation, are the major lenders to the project.

In addition, commercial banks from the U.S., Europe, Japan, Australia and other Asian countries and bond holders also contribute to the project.

Paiton, which is a joint-venture company principally owned by Edison Mission Energy, GE Capital and Mitsui & Co., owns and operates a 1,230 megawatt coal-fired power plant in East Java, the largest independent power project in Indonesia. The company will sell its power to state electricity firm PLN.

Financing for the Paiton power project was completed in 1995 and the plant was commissioned four years later.

However, the Asian financial crisis has forced the Indonesian government to seek renegotiation of the original power purchase agreement.

In 2002, Paiton and PLN agreed to an amended power purchase agreement.

The U.S.-ASEAN Business Council is the U.S.'s leading private business organization dedicated to promoting increased trade and investment between the U.S. and members of the Association of South East Asian Nations (ASEAN).

The council membership includes around 150 of the Fortune 1000 American companies with trade and investment interests in the ASEAN region.