Paiton Energy ready to talk contract terms with PLN
JAKARTA (JP): Power producer Paiton Energy Company's president commissioner Hashim Djojohadikusumo said on Friday that the company was ready to renegotiate with state electricity company Perusahaan Listrik Negara (PLN) on the contractual terms for the purchase of power from its giant power plant in Probolinggo, East Java.
"Our foreign partners in Paiton Energy, realizing the difficulties faced by PLN, are ready to reach a compromise for a win-win solution," Hashim said at a meeting with senior editors of the local press.
He said the foreign partners in Paiton Energy were in fact disappointed over PLN's move but they realized that the renegotiation was a better solution than the alternative of writing off the US$1.8 billion project.
However Hashim refused to detail the changes in the contract that Paiton Energy was ready to accept during the renegotiation.
"Our partners are ready to face the consequences of reducing their returns on investment," Hashim said.
Hashim's company, PT Batu Hitam Perkasa, holds a 15 percent stake in Paiton Energy, while the remaining shares are owned by giant power companies from the United States, Mission Energy and General Electric, and Japan's Mitsui.
Paiton One is the first power project to be built by an independent power producer (IPP) in the country.
PLN has asked all the 26 independent power producers (IPP) with which it has signed power purchase agreements (PPA) to renegotiate their contracts following the financial difficulties it is suffering amid the depreciation of the rupiah against the dollar.
PLN sells power in rupiah but buys power from IPPs in dollars.
The Paiton One coal-fired power plant, which has the generation capacity of 1,230 Megawatt (MW), has recently come on stream. But. Hashim said, PLN, refusing to buy its power, had thus far only given Paiton Energy the payment to cover the expenses spent by Paiton on purchasing fuel.
Hashim said the development of Paiton One was financed by the Japan ExIm Bank, the U.S. ExIm Bank and the U.S. Overseas Private Insurance Corp. (OPIC). As such, any action by PLN to breach contract with Paiton Energy will have the consequence of inflicting losses on the Japanese and the U.S. governments.
"Are we ready to create problems with these countries?" Hashim asked.
The power purchase agreement (PPA) signed by the company and PLN in Feb. 1994 says that PLN has to buy 80 percent of Paiton One's capacity under a take-or-pay scheme.
PLN has to pay Paiton Energy an average 7.5 US cents per kilowatt hour (kwh) for its power for 30 years.
In the first six years, PLN has to pay 8.6 cents per kwh. The price will be cut to 8.41 cents for the next six years and 5.6 cents for the last 18 years.
Bidding
Many analysts say that Paiton One has set too high price for its power, but Hashim argued the high price was justified by the fact that Paiton One was a pioneer project and Indonesia has a high political risk.
The high price was also caused by the fact that Paiton Energy was also obligated by the government to build facilities and infrastructure in the Paiton power plant complex that would be shared by PLN and Paiton Two which also have power plants in the complex.
"The cost for the development of the common facilities and infrastructure at the Paiton power plant complex is equal to 1 cent per kwh. Thus, if we had not been obliged to build the facilities and infrastructure, we would have been able to cut the price of our power to an average 6.5 cents per kwh," Hashim said.
He also denied allegations that Paiton Energy had won the Paiton One project without competitive bidding thanks to his close connection with former president Soeharto.
He acknowledged that he had access to Soeharto and talked directly to him regarding the project. "But, I did that because the then Minister of Mines and Energy IB Sudjana who was responsible for the power sector, refused to meet me for nine months for unknown reasons," Hashim said.
Hashim said four companies were taking part in the bidding for the project, including Paiton Energy and Intercontinental Energy Corporation, a consortium comprising an American businessman Stephen Roy and the Bimantara Group controlled by Soeharto's son Bambang Trihatmodjo.
Hashim said the government first announced that the Bimantara- Continental consortium was to win the project but it later withdrew its decision following World Bank concerns at the high power price set by the consortium.
According to the bank, Hashim said, the power price set by Bimantara was higher by $100 million per year for 30 years than the one set by Paiton Energy.
The government then passed the project to Paiton One.
"At that time I was really pleased that we would save the Indonesian treasury and public so much money," Hashim said. (jsk)