Paiton Energy to file arbitration suit to counter PLN lawsuit
Paiton Energy to file arbitration suit to counter PLN lawsuit
JAKARTA (JP): Independent power producer PT Paiton Energy said
on Friday it would file an arbitration lawsuit to counter state
electricity PT PLN's legal measure to nullify their power
purchase contract.
"The action this week by PLN to sue Paiton Energy in the
Indonesian courts has forced Paiton Energy to send a notice of
arbitration to PLN.
"Paiton Energy has taken this action to preserve the sanctity
of its power purchase agreement and to protect the interest of
its shareholders, lenders and other credit support providers,"
the company said in a statement.
The lenders and credit support providers include the Export
Import Bank of Japan, the Export Import Bank of the United
States, the Overseas Private Investment Corporation and the
Ministry of International Trade and Industry of Japan, it said.
The company, which owns and operates the giant Paiton Swasta I
power plant in Probolinggo, East Java, also said it was
disappointed over PLN's lawsuit.
"PT Paiton Energy is deeply disappointed that PLN would file a
lawsuit at a time when we're meeting daily and making significant
progress towards an agreement," it said.
It said however it was still committed to negotiate on the
contract despite the lawsuit.
"Notwithstanding the notice of arbitration, Paiton Energy
stands ready to renew negotiations with PLN and the Government of
Indonesia toward an amicable resolution of the issue in the near
future," it said
On Thursday, PLN filed a lawsuit at the Central Jakarta court
to nullify the power purchase agreement (PPA) awarded to Paiton
Energy in February 1994.
PLN's president Adhi Satriya said the PPA was "unlawful,
unfair and not transparent", and as such, the court should
declare the contract "void and not enforceable."
He said the PPA was set at a too high price for the power
price produced by Paiton, and the company had kept refusing to
lower the price during negotiations over the past seven months.
Paiton sells its power to PLN at the price of 8.5 U.S. cents
per kilowatt hour (kWh) for the first to sixth year of the
contact and the price will progressively fall to 5.5 cents per
kWh until the 30th year, when the contract expires.
Paiton Energy I is owned by Japan's Mitsui (32.5 percent),
Edison Mission of the United States (40 percent), General
Electric, also of the United States (12.5 percent) and local firm
PT Batu Hitam Perkasa (15 percent).
Batu Hitam is owned among others by tycoon Hashim
Djojohadikusumo, brother of former president Soeharto's son-in-
law Prabowo Subianto and Agus Kartasasmita, brother of former
coordinating minister of economy, finance and industry Ginandjar
Kartasasmita.
Paiton I, which has a power generation capacity of 1,230
Megawatts, came on stream in March this year.
Adhi said the lawsuit was the last option taken by PLN, after
becoming tired of unsuccessfully negotiating with Paiton.
However, Paiton maintained it had offered significant
concessions during talks with PLN.
The company said it had agreed to lower the cost of coal for
the power plant as demanded by PLN, and had accepted payments
from PLN for outstanding invoices at a rate of Rp 2,450 to the
U.S. dollar for operating costs and interest payment to lenders
on a temporary basis.
"Together, these provisions mean that we have agreed to an
interim price of 3.3 U.S. cents per kilowatt hour. This is a good
offer and it is regrettable that PLN decided not to respond,"
Paiton said.
The company maintained that the power tariff for Paiton I was
comparable to other contracts in Southeast Asia and around the
world.
It said the tariff price for its power was projected to be 5.5
cents per kWh, excluding the cost for the construction of
additional infrastructure required by PLN that would be shared by
power units owned by other companies at PLN's power plant
complex.
Another independent power producer, PT Jawa Power, is
developing a 1,220 MW coal MW power plant known as Paiton Swasta
II at the complex where PLN operates a 800-MW power plant.
The infrastructure, including roads, sea water intakes and a
switchyard, would increase at approximately 0.75 cents per kWh to
the price of its power, the company said.
The company also denied any corrupt practices conducted in the
process of awarding the contract.
"Paiton Energy is not aware of any evidence of improper
actions by any of its members to influence the award of the
Paiton Swasta I project or the terms of our agreement with the
Government of Indonesia."
Adhi said PLN had evidence of corrupt practices conducted in
the award process of the Paiton Swasta I contract and it would
reveal the evidence to the court during the inquiry into the case
so that it may become "public knowledge." (jsk)