PLN and PT Cepa agree on contract amendments

PLN and PT Cepa agree on contract amendments

JAKARTA (JP): The state-owned electricity company PLN has
signed three contract amendments with PT Consolidated Electric
Power Asia (Cepa) of Hong Kong and has issued a financial
disclosure for the private company's Tanjung Jati-B power plant
project in Central Java.

"We recently signed the amendments and issued the financial
disclosure for Cepa's electricity project," PLN's president
Djiteng Marsoedi told the press yesterday after addressing a
seminar on the role of the private sector in electricity
development.

The three contract amendments are on the project's location,
extension of construction time and coal supply.

He said Cepa will construct the combined cycle power station
at a new location in Tubanan village, Jepara with a generation
capacity of 2 X 660 megawatts.

He did not elaborate on the time extension and the coal
supply. "I don't remember. But they will start the construction,"
he said.

According to Djiteng, through the amendments and the issuance
of the financial disclosure, Cepa can now start building the
power plant.

The financial disclosure will provide a guarantee for banks
that are involved in financing the US$1.74 billion project. Six
foreign banks -- ABN Amro, Dai-ichi Kangyo, Banque Paribas,
Citibank, Fujibank HSBC and Sumitomo Bank -- have expressed their
financial commitment to the project.

Djiteng said PLN had already agreed with Cepa's proposal to
set the electricity price from the Tanjung Jati-B station at 6.45
U.S. cents per kilowatt hour.

Asked about the possibility of reducing the price to less than
6.45 cents, as had been requested by PLN as a prerequisite to
reacquire the electricity contract from the state company, he
said: "It had been settled. We agreed to a price of 6.45 U.S.
cents."

However, he said Cepa was ready to reduce the price if it was
given an additional generation capacity. "This is something like
their bargaining position. But for this, we need to ask for the
government's approval," he said.

In the power purchase agreement, signed by PLN and Cepa in
September 1994, the price was set at 7.39 U.S. cents. However,
after PLN proposed to the government to cancel the contract with
Cepa, the private company expressed its willingness to reduce the
price to 6.45 cents.

PLN made the proposal to the government in July to cancel
Cepa's handling of the Tanjung Jati-B project because the private
company failed to begin construction as scheduled. The
government, however, decided to allow Cepa to continue the
project provided that it renegotiated the contract with PLN. (13)