PLN ordered to operate idle Dieng power plant

JAKARTA (JP): The government has instructed state-owned electricity company PLN to operate the idle Dieng geothermal power plant in Central Java in order to obtain cash for the repayment of a US$260 million claim made by the U.S. insurance firm, Overseas Private Investment Corp (OPIC), a minister said on Tuesday.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said that the proceeds were needed to avoid drawing capital from the already strained state budget.

"If the power plant could be operated, it would be able to cover the OPIC claim without burdening the state budget," he told reporters.

Purnomo said Minister of Finance Boediono had ordered PLN to operate the 60 megawatt Dieng geothermal power plant on a temporary basis pending the government's decision on the definite operator of the power plant.

State-owned oil and gas company Pertamina was also interested in operating the power plant, but it had yet to make a final decision, according to Purnomo.

"The government is still discussing whether to give the operation to a new company jointly owned by PLN and Pertamina," Purnomo said.

The Dieng geothermal power plant was initially owned by the American independent power producer (IPP), CalEnergy Company Inc., which had been renamed MidAmerican Energy Holdings Co. Aside from the Dieng power plant, it had also developed the Patuha geothermal power plant in West Java.

The company, however, abandoned the power projects in 1998 following a dispute with PLN and the government, which ordered it to halt the project in a belt-tightening effort to cope with the economic crisis.

MidAmerican then filed arbitration proceedings against PLN and the government and won the dispute.

OPIC, which is an insurance firm owned by the U.S. government, paid the company $260 million in compensation.

But, OPIC subsequently demanded the Indonesian government and PLN reimburse the insurance claim.

The Dieng geothermal power plant was initially designed to have a power generation capacity of 400 Megawatts (MW). But CalEnergy could only complete the construction of a power unit with the generation capacity of 60 MW when it abandoned the power plant in 1998. The power plant has since been left idle.

Meanwhile, the Patuha power plant, which was designed to have a generation capacity of 320 MW, was only 30 percent completed when CalEnergy stopped construction work in 1998.

Former minister of finance Rizal Ramli signed an agreement with OPIC last July that allows the Indonesian government to reschedule the payment of the insurance claim in a scheme to be agreed upon by the government with the country's Paris Club of creditors.

But, the new Cabinet has annulled the agreement. (11)