PLN renews calls on Paiton to lower power prices

JAKARTA (JP): State-owned electricity company PT PLN renewed calls on developers of the Paiton power plants in East Java on Wednesday to lower prices of their power supplies, accusing them of mark-up practices.

"The prices of their power supplies are too high. It's a 'world-class' markup," PLN president Adhi Satriya said on the sidelines of a seminar on cogeneration.

Adhi made the calls on PT Paiton Energy Co. and PT Jawa Power, which are developing two giant coal-fired power plants in Paiton, Probolinggo.

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, controlled by tycoon Hashim Djojohadikusumo.

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

PT Jawa Power is owned by Siemens of Germany, PowerGen of Britain and local company PT Bumipertiwi Tatapradipta, controlled by former president 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.

Both power plants are being developed on a plot owned by PLN, where the state-owned company is operating an 800 MW power plant.

Under the 30-year power purchase agreement (PPA) signed in 1994, PLN has to buy power from Paiton Energy at 8.4 cents per kwh in the first six years, at 8.2 cents during the next six years and 5.4 cents for the remaining 18 years.

PLN signed a PPA with Jawa Power in 1995, under which the former would buy power from the latter at 6.59 cents per kilowatt hour for 30 years.

Adhi said PLN would not buy power from both companies due to the power oversupply on the Java-Bali power network. This is despite the fact Paiton Energy has been operating one of its two power units since May this year and Jawa Power is about to operate one of its power units.

However, under the PPA's take-or-pay clause, PLN still has to pay the company US$995 million per year for the so-called "fixed cost", Adhi said.

"The amount is equal to the budget for the development of a two-unit power plant with a combined capacity of 600 MW," Adhi said.

Adhi said PLN was negotiating with both companies to reduce the price of their power to a reasonable level.

Adhi said the reasonable price level for power supplies from both companies was about 3.4 cents per kwh, taking into account the fact that both companies had used commercial loans for the development of the power plants.

He noted both companies could reduce their construction costs by building their facilities on the plot owned by PLN.

In comparison, Adhi said, PT HI Power Tubanan, which was developing the Tanjung Jati B coal-fired power plant in Jepara with a 1,320 MW generation capacity, a higher capacity than the Paiton power plants, was ready to reduce its power price to 2.3 cents per kwh from 6.4 cents.

"This is despite the fact the company had to spend costs to appropriate the land for their facilities," Adhi said. (jsk)