PLN defends Tanjung Jati B buyout plan

JAKARTA (JP): State-owned electricity company PT Perusahaan Listrik Negara (PLN), countering criticisms over its plan to buy out the Tanjung Jati B power plant, said on Wednesday the buyout scheme would alleviate its financial commitments.

PLN president Adhi Satriya said the buyout scheme was the most favorable option presented to PLN during recent negotiations with dozens of independent power producers (IPPs).

He said under the power purchase agreement (PPA) signed by PLN and PT HI Power Tubanan -- the owner of Tanjung Jati B -- in 1994, PLN had to pay the company US$ 530.3 million annually for its power supplies from Tanjung Jati B located in Jepara, Central Java.

But, if PLN bought out the power plant, it would spend only $ 218.3 million per year, Adhi said.

"The buyout will enable PLN to save $ 312 million in operating costs annually, which is very significant for the cash-strapped PLN," Adhi said in a statement.

The 1,330 Megawatt (MW) coal-fired power plant, located in Central Java, is 80 percent owned by Hopewell Holdings Ltd. of Hong Kong with the remaining shares held by PT Impa Energy Co., owned by Djan Farid.

Farid is known to have links with the daughter of former president Soeharto, Siti Hardijanti Rukmana.

PLN's plan to buy out the power plant has sparked controversy, following reports that the government was seeking to secure a $1.15 billion loan from Japan under the Miyazawa Plan to finance the buyout.

They said PLN should not buy out the plant using the Miyazawa Plan funds which are allocated by the Japanese government to help poor people in crisis-hit Asian countries, including Indonesia.

But PLN denied that the loan was part of the Miyazawa Plan's fund.

The economic counselor of the Japanese Embassy in Jakarta, Kaoru Shimazaki, confirmed on Wednesday that the Japanese government had received in June a request from the Indonesian government for the new loan.

"The request was not for the Miyazawa Initiative Plan, but for the Japanese Loan, which has similar conditions to the special loans," he said.

The special loans for infrastructure projects carry an interest rate of about 0.75 percent with a grace period of 10 years and a maturity period of 40 years.

He said the Japan government was still considering whether to approve the loan request.

PLN's buyout plan has prompted another IPP -- PT Tanjung Jati Power Company -- to ask PLN to also buy out its Tanjung Jati A power plant adjacent to Tanjung Jati B.

The Bakrie Group, which owns 20 percent of the Tanjung Jati A power plant, put on the power plant up for sale on Tuesday at a price of $1.05 billion -- cheaper by $150 million than Tanjung Jati B, despite the fact that both have a similar power generation capacity.

Adhi said Bakrie's offer was "interesting", saying he would talk to the company about the offer. (jsk/cst)