PLN, govt sued for breaching contracts
JAKARTA (JP): Giant U.S. power producer CalEnergy Company Inc. has filed suit in Washington, D.C., against state electricity company PLN and the Indonesian government for breaching power purchase contracts.
CalEnergy Asia president and chief operating officer Donald M. O'Shei Jr. told The Jakarta Post on Thursday the arbitration lawsuit was filed Aug. 14 at the United Nations Commission on International Trade Law (UNCITRAL) for failure to pay for power supplies from its geothermal power plant in Dieng, Central Java, since the start of operations in March.
He said monthly power supplies from the plant cost between US$4.5 million and $5 million.
He said the Indonesian government was also held responsible for the payment failure because it guaranteed power purchase agreements (PPA) between PLN and CalEnergy.
O'Shei said CalEnergy also sued the Indonesia government for suspending its geothermal power project in Patuha, West Java, arguing the PPA did not allow for the action to be taken.
Although the Patuha project was 30 percent completed, he said, the company could not carry on with work since bankers halted fund disbursements due to the government's decision.
"In brief, we want the contracts to be honored," O'Shei said on the sidelines of the first national congress of the Indonesian Electric Power Society.
CalEnergy is the second independent power producer (IPP) seeking arbitration to settle disputes with PLN.
Another American firm, Florida Power & Lights Co, the majority owner of PT Karaha Bodas Company L.L.C, filed arbitration litigation against the government in April for postponing its geothermal power project in Karaha, West Java.
CalEnergy has three power geothermal power projects located in Dieng, Patuha and Bedugul, Bali.
The 400-Megawatt (MW) Dieng power project is being developed with Indonesian partner PT Himpurna Enersindo Abadi, a company formed by the military veterans association Himpurna.
CalEnergy has thus far completed the development of the first unit of the Dieng power plant with a power generation capacity of 60 MW.
It was one of the 10 power projects allowed by the government to continue in a presidential decree issued in September last year.
PLN has signed contacts with 26 IPPs. The presidential decree shelved 16 power projects, including Patuha and Bedugul.
CalEnergy was allowed to continue developing a power unit at the Patuha power project with generation capacity of 80 MW in November last year, but it was suspended again in January this year.
The 320-MW Patuha project is being codeveloped by CalEnergy and Indonesia's Mahaka Energy. CalEnergy's local partner for the 320-MW Bedugul project is PT Pandanwangi Sekartaji, a subsidiary of the Panutan group.
CalEnergy secured two syndicated loans worth $560 million, arranged by Credit Suisse Boston, to finance the development of the three power projects.
O'Shei said the company had invested more than $400 million for the three geothermal projects so far.
According to O'Shei, CalEnergy has hired a local attorney, Hanafiah & Ponggawa, and the international law firm of Latham Watkins to represent the company in arbitration against PLN. It has also chosen an arbitrator for the court.
He said the Indonesian government and PLN had also appointed their own lawyers and arbitrator.
Both arbitrators have yet to choose a third arbitrator to judge the dispute.
"The arbitration is expected to start in December," O'Shei said.
PLN is experiencing severe financial problems due to the rupiah's fall against the American dollar since the middle of last year. It receives revenues in rupiah but pays most of its operational costs, including the purchase of power from IPPs, in dollars.
PLN suffered a net loss of almost Rp 15 trillion ($1.3 billion) in the first half of the year. (jsk)