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)