PLN annuls deal with private firm

PLN annuls deal with private firm

JAKARTA (JP): State-owned electricity company PLN has
unilaterally annulled its power purchase contract with PT
Cikarang Listrindo after the latter refused to renegotiate their
deal.

PLN president Djiteng Marsudi told reporters Saturday he had
notified Cikarang Listrindo, an independent power producer owned
by former president Soeharto's cousin Sudwikatmono, that his firm
would stop buying power from it beginning June 15.

PLN was obliged to buy from Cikarang Listrindo for 20 years
under a contract signed in 1996.

"I am ready to face a lawsuit as a result of this move,"
Djiteng said.

Cikarang Listrindo, which runs a 150 Megawatt (MW) gas-fired
power plant in Bekasi, West Java, started operation in 1993 with
the exclusive right to supply power for industrial plants in
Bekasi.

According to Djiteng, PLN was forced to buy some of the
company's power in the same year because its supply was
insufficient at the time.

PLN was "obliged" to purchase ever increasing volumes of power
in the following years, he said, reaching Rp 22 billion (about
US$2.2 million) last month.

Djiteng indicated he might take a similar action against other
independent power producers (IPP) which refused to renegotiate
contracts to alleviate PLN's financial problems amid the monetary
crisis.

"In the beginning, I would rather face a lawsuit in the local
court," Djiteng said. He was referring to the possibility that
PLN might face lawsuits in international courts as most other
IPPs were controlled by foreign investors.

PLN asked the IPPs to renegotiate the contracts following the
heavy financial burdens resulting from the sharp depreciation of
the rupiah against the U.S. dollar.

PLN suffered a loss of more than Rp 500 billion last year and
has predicted losses this year would exceed Rp 2 trillion due to
the rupiah's sharp depreciation. It has tripled the company's
dollar-based spending, including for power purchase and foreign
debt payment.

PLN buys power from IPPs at an average price of 6.4 U.S. cents
or Rp 640 per kilowatt hour, compared with its average selling
price of Rp 234 per kilowatt hour.

The company has signed contracts with 26 IPPs, most of which
are owned by international power companies in partnership with
Soeharto's family and cronies.

Most of the power projects are still under construction or
were postponed by the government in a retrenchment measure to
cope with the crisis.

Pressure

IPP power plants which have come into operation include the
Sengkang power plant in South Sulawesi owned by Australia's
Energy Equity, El Paso of the U.S. and Soeharto's daughter Siti
Hardijanti Rukmana, and the Salak geothermal power plant in West
Java, owned by the U.S. Unocal Corporation and the Nusamba Group,
controlled by longtime Soeharto associate Mohammad "Bob" Hasan.

Djiteng confirmed that PLN would stop taking power from
Sengkang starting this month but had yet to annul its contract.

"There is already a power oversupply in the province," Djiteng
said.

He emphasized PLN would not pay the company despite a
contractual take-or-pay clause stating PLN has to pay the company
for 80 percent of its power generation capacity, whether or not
it used its power.

"PLN has no money now," he said.

Djiteng said he was disappointed over the reluctance of the
IPPs to renegotiate the contracts with PLN.

"We were once invited to a meeting where we revealed our
financial difficulties. But none of them asked a single question
or made any comment."

Djiteng noted PLN actually did not need most of the private
projects but the company was forced to enter into the contracts.

"Most of the power projects were given without tender. I was
in one way or another pressured to sign the contracts."

Djiteng cited as an example the $2 billion coal-fired Paiton
II awarded to PT Jawa Power, owned by Germany's Siemens,
Britain's Power Gen and Bumipertiwi Tatapradipta, controlled by
Soeharto's son Bambang Trihatmodjo.

He said the signing of the contract was made in 1995 during a
state visit of Soeharto to Germany.

"I was invited to go along, unaware that I was going to sign a
power purchase contract there. I was taken aback after realizing
the fact but couldn't do anything at that time but sign the
contract in front of Soeharto and (German chancellor Helmut)
Kohl," Djiteng recalled. (jsk)