Paiton Energy will expand power plant

Tony Hotland, Jakarta

Independent power producer PT Paiton Energy has announced it will install additional generating capacity of 800 Megawatts (MW) to its 1,290 MW coal-fired power plant in East Java amid growing electricity demand in the country.

Company president Ronald P. Landry told a media conference on Monday that construction of the new unit would commence in early 2005 after completing some legally binding contracts and terms with the government, and was expected to be completed in 2008.

"Construction cost of the expansion will be approximately US$ 580 million," he added.

Landry said that the power produced from the additional facility would be sold at a lower rate to state electricity firm PLN.

"The rate currently under discussion with PLN is 4.79 US cents per kWh (kilowatt-hour), compared with Paiton Energy's restructured rate of 4.93 cents per kWh," he said, adding that an agreement was expected to be reached by the end of June.

Landry assured that the rate for power from the new unit would not escalate within the next 15 to 20 years, and was expected to help PLN make a profit and maintain power supplies.

He explained further that the company was able to sell power at a lower rate because it did not have to build supporting facilities, as they had already been developed for the existing plant.

Paiton Energy, which started operating in 1999, owns and currently operates the Paiton coal-fired power plant.

The company is jointly owned by affiliates of Edison Mission Energy. Mitsui & Co., General Electric Capital Corp. and Indonesia's PT Batu Hitam Perkasa.

Regarding Edison Mission's plan to sell its 44 percent stake in Paiton, Landry affirmed that there were already a number of interested buyers to replace Edison Mission.

"The investors are also fully aware of our expansion plan and our intention to sell the power produced at a lower rate," he said.

The government has stated that Indonesia will need 24,000 MW of additional electricity generating capacity over the next 10 years and that it will rely largely on private investors to finance at least two-thirds of the demand.

Landry also assured that no disruption in coal supplies would occur as the company had been able to conclude reliable, long- term contracts with companies in Kalimantan.

"The contracts allow us to purchase coal $15 to $20 cheaper (per ton). We also have a coal stockpiling system with a capacity of 500,000 tons that ensures a 45-day supply to Paiton," he said.