PLN reaches preliminary agreement with Paiton
Moch. N. Kurniawan, The Jakarta Post, Jakarta
State electricity company PT PLN has reached a tentative agreement to pay 4.93 US cents per kilowatt hour over 40 years to privately-owned PT Paiton Energy Co., the operator of the Paiton I power plant, according to PLN's director Eddie Widiono.
Eddie said on Friday that under the "term sheet agreement", PLN would also pay US$4 million per month for 30 years or a total of $1.44 billion throughout the period for "restructuring costs", which include arrears and other claims.
He said both parties were continuing to discuss "several items" before signing the final deal.
He did not provide details of the items still being discussed.
"We expect to ink the final deal in March which will automatically amend the initial power purchase agreement (PPA)," he told the Jakarta Post.
PLN and Paiton Energy signed the PPA in 1994 as part of PLN's effort to meet the growing power demand in the country.
Under the PPA, PLN agreed to buy electricity from Paiton Energy at 8.4 cents per kWh for the first five years, 8.2 cents for the sixth to twelfth years of operation and 5.4 cents for the last 18 years of operations, or equivalent to an average of 6.55 cents for 30 years of operations.
Under the contract, Paiton Energy must generate 1,230 megawatts (MW) of power from the coal-fired Paiton I plant in Probolinggo regency, East Java province.
Paiton Energy is owned by U.S-based energy firm Edison Mission Energy, another U.S giant GE Capital, Japanese company Mitsui & Co and local company Batu Hitam Perkasa, which is controlled by businessman Hashim Djojohadikusumo.
PLN also signed another 26 PPAs with other independent power producers (IPP) prior to the economic crisis.
But Paiton's contract, along with other PPAs, has been renegotiated following PLN's complaints over the high power tariff.
PLN fell into financial difficulties after the crisis because it sells its power in rupiah but pays most of its expenses, including for the purchase of power from the IPPs, in dollars.
Elsewhere, Eddie said PLN would also sign an agreement early next month with PT Jawa Power, the operator of the Paiton II power plant, to pay the latter 4.68 cents per kWh for 30 years starting 2001.
He said that PLN would also pay $900,000 per month in arrears to Jawa Power for the next 30 years.
"We have received approval from the government to sign the deal, now we're only finalizing the legal aspects," he said.
PLN signed a PPA with Jawa Power in 1995, under which PLN has to pay 5.72 cents per kWh for 30 years for power supplied from the latter's 1,230 MW power plant.
Eddie also said PLN would soon reach an agreement with Palembang Timur, Sibolga A, Amurang and Asahan, but refused to provide a timetable.
The prolonged disputes between PLN and the IPPs have also seriously eroded foreign investor confidence in the country's power sector while the government now desperately needs foreign investment in the power sector to avoid a power crisis in the future.