PLN confident of inking Paiton deal

PLN confident of inking Paiton deal

Mochammad N. Kurniawan, The Jakarta Post, Jakarta

State-owned electricity company PLN said on Monday it expected
to reach a final long-term agreement with independent power
producer (IPP) PT Paiton Energy by the year's end.

"We expect to reach an agreement at the end of this year," PLN
president Eddie Widiono told reporters prior to a working session
with House of Representatives Commission VIII on science,
technology and environment.

He said that both sides were likely to agree on a long-term
rate for power, which Paiton sells to PLN at below 5 U.S. cents
per kilowatt hour (kWh).

Paiton is one of the 27 IPPs whose power-selling contract to
PLN was terminated by the government in the wake of the 1997
financial crisis. The government has demanded PLN renegotiate
the contract, particularly on the power selling price, which has
been deemed too expensive due to a drop in the value of the
rupiah against the U.S. dollar.

PLN has so far been able to close deals with only three IPPs.

Aside from the rates, PLN and Paiton were also still
negotiating on the total amount of "arrears" to be paid by PLN to
Paiton, Eddie said.

Paiton Energy, a joint venture between Mitsui & Co., General
Electric, Edison Mission Energy and PT Batu Hitam Perkasa,
operates the coal-fired Paiton I power plant in East Java, which
has a power capacity of 1,230 megawatts.

Late last year, PLN and Paiton agreed to a long-term agreement
scheme for PLN's payment to Paiton.

Both companies agreed to a three-phase scheme under which
Paiton would gradually hike its power charges beginning this year
at 2.6 cents per kWh.

This rate allows Paiton to cover the costs of operating the
plant and pay interest on its $1.82 billion debt.

In phase two, between 2002 and 2003, Paiton will further raise
its rates, thus permitting some repayment of debt principals.

By then, both companies also expect the completion of the
much-needed Java-Bali transmission grid to help meet power demand
in that region.

Finally, PLN and Paiton hope to agree on a long-term rate,
commencing in the third phase, in 2004.