Paiton Energy committed to PLN's renegotiation program

JAKARTA (JP): Electricity company Paiton Energy said on Tuesday it was committed to the renegotiation program launched by state electricity company PLN and dismissed the idea of settling its dispute with PLN through an arbitration court.

Paiton president commissioner Hashim Djojohadikusumo said the ruling won by independent power producer (IPP) MidAmerican Energy Holdings Company, formerly known as CalEnergy Corp., from an international arbitration panel would not make Paiton abandon the renegotiation process.

"We don't have any plans (to go to an arbitration court). They (MidAmerican) are confrontationists. That's why they went to the arbitration court.

"Our partners are not that type. We can make compromises. We realize the current difficulties are beyond PLN's control. That's why we are negotiating," Hashim said.

Paiton Energy Company has developed a coal-fired power plant in Probolinggo, East Java, with a power generation capacity of 1,230 megawatts (MW).

The company is 15 percent owned by Hashim's company, PT Batu Hitam Perkasa, while the remaining shares are owned by United States-based power companies Mission Energy and General Electric and Japanese power company Mitsui.

The arbitration panel in its hearing in Jakarta found PLN had breached the power purchase contracts it had signed with MidAmerican subsidiaries Himpurna and Patuha, which had developed geothermal power plants in the Dieng area of Central Java and the Patuha area of West Java.

The panel said PLN breached the contracts by refusing to buy power from Himpurna and by shelving Patuha's project.

The panel ordered PLN to pay US$572 million in damages for the breach of contracts.

The panel, which is supervised by the United Nations Commission on International Trade Law, was presided over by an international attorney with panel members including an Australian businessman and an Indonesian judge.

Some analysts believe the arbitration ruling will encourage other IPPs to withdraw from PLN's lengthy renegotiation program and instead go the arbitration route.

Cash-strapped PLN has refused to buy power from IPPs due to the financial burden cause by the monetary crisis. PLN sells its electricity in rupiah but pays most of its costs in dollar, including the power it purchases from IPPs.

PLN plunged deeper into the red last year with a net loss of Rp 9.156 trillion ($1.1 billion), compared to Rp 579.01 billion in losses in 1997.

During the renegotiations, PLN wants to change a number of the terms of its contracts, including the price it pays to IPPs for power supplies.

Hashim said Paiton was ready to cut the price of its power in return for an extension of its power purchase contract.

Under the power purchase agreement signed by PLN and Paiton Energy in February 1994, PLN must pay Paiton Energy an average of 7.5 US cents per kilowatt hour (kwh) for its power for 30 years.

"We are ready to cut the price but we want the contract to be extended up to 50 years or 60 years. That's the alternative we are going to put forward during the renegotiation.

"These partners of mine are real investors. They don't just walk away," Hashim said.

Hashim said Paiton Energy had formed a team of negotiators to talk with PLN.

PLN has signed 26 power purchase agreements with IPPs, which mostly are controlled by foreign companies in partnership with local businesspeople.

PLN president Adhi Satriya said his team of negotiators had started renegotiations with several IPPs. (rid/jsk)