PLN probes corruption in purchase contracts

PLN probes corruption in purchase contracts

JAKARTA (JP): State-owned electricity company PT PLN said on
Wednesday it was collecting evidence on corrupt practices
allegedly conducted by independent power producers (IPPs) in
securing power purchase contracts from the state company.

PLN president Adhi Satriya said PLN would ask courts to annul
contracts secured by the IPPs through corrupt practices and to
punish all those involved, including former PLN presidents.

He said PLN, together with the Development Finance Comptroller
was investigating the alleged corruption, collusion, and nepotism
but he did not reveal the time frame for completion of the
investigation.

"All people responsible for the awarding of the contracts
should be legally accountable for their actions. I myself cannot
explain to the public why PLN signed power purchase agreements
with considerably marked-up prices

"In the investigation, PLN will not protect anyone involved in
the corrupt practices," Adhi said on the sidelines of a meeting
on the formation of the company's workers union.

Adhi refused to name PLN's officials considered "responsible"
for awarding the power purchase agreements (PPAs).

But PLN data reveals that 10 of the 27 PPA entered into by PLN
with IPPs between mid-1992 to early 1995 were signed by PLN's
then president Zuhal, currently serving as State Minister of
Research and Technology.

The remaining 17 PPA were signed between early 1995 and 1997
by Adhi's predecessor Djiteng Marsudi.

Djiteng has repeatedly said he was "forced" to sign the PPAs
under political pressure from those associated with IPPs, mostly
former president Soeharto's children and associates.

Djiteng recently said he was ready to reveal evidence of the
pressure he experienced in the process to award the contracts.

Adhi made the statement amid a stalemate in negotiations
between PLN and several IPPs, including PT Paiton Energy Co. and
PT Jawa Power -- developers of the Paiton power plants in
Probolinggo, East Java -- on the possibility to reduce their
power prices.

Paiton Energy is owned by American companies Mission Energy
and General Electric in partnership with Japan's Mitsui and local
company PT Batu Hitam Perkasa, which is controlled by business
tycoon Hashim Djojohadikusumo.

It is developing two power units, popularly known as Paiton I,
with a combined power generating capacity of 1,230 Megawatts
(MWs).

PT Jawa Power is owned by Siemens of Germany, PowerGen of
Britain and local company PT Bumipertiwi Tatapradipta, controlled
by Soeharto's son Bambang Trihatmodjo.

It is developing two power units, popularly known as Paiton
II, with a combined power generation capacity of 1,220 MW.

Under the 30-year PPA signed in 1994, PLN must buy power from
Paiton Energy at 8.4 U.S. cents per kilo watt per hour (kwh) in
the first six years, at 8.2 cents during the next six years, and
at 5.4 cents for the remaining 18 years.

PLN signed a 30-year PPA with Jawa Power in 1995 under which
the former will buy power from the latter at 6.59 cents per
kilowatt hour.

Adhi said based on the international pricing formula a
reasonable price for power supplies from the power plants was
about 3.5 cents per kwh. He said the estimate took into account
the fact that the companies used commercial loans to develop the
power plants. (jsk)