Paiton Energy committed to PLN's renegotiation program

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)