PLN signs power-purchase deal for Tanjung Jati C
JAKARTA (JP): State-owned electricity company PLN signed a power-purchase agreement (PPA) with PT Consolidated Electric Power Asia (CEPA) Indonesia yesterday for the controversial Tanjung Jati C power project worth US$1.62 billion.
The agreement was signed by PLN president Djiteng Marsudi and CEPA president Gordon YS Wu, a Hong Kong businessman, in a ceremony presided over by Minister of Mines and Energy I.B. Sudjana.
Present at the ceremony were the chairman of the House of Representatives Commission V for manpower and trade Marzuki Achmad, and commission vice chairmen Muchsin Bafadal and Syamsudin.
Head of PLN's negotiating team for private power projects Rahardjo Moecharar said the 1,320 megawatt (MW) coal-fired power plant, located in Jepara, Central Java, was scheduled to come on stream in 2002.
According to the agreement, PLN has to buy 80 percent of the power plant's capacity at a price of 5.73 U.S. cents per kilowatt hour (kWh).
"The price was agreed on by the minister of mines and energy in October 1997," said Rahardjo, who is also PLN's director of construction.
Rahardjo said PLN's team of negotiators had held five meetings with CEPA's executives throughout September.
The Tanjung Jati C project has sparked controversy since it was announced last August.
CEPA was awarded the project on the back of a recommendation from Minister/State Secretary Moerdiono.
The project was given to CEPA in return for its willingness to lower the price of power for its first project, the coal-fired Tanjung Jati B, also in Jepara and with the same power capacity.
The pricing scheme of Tanjung Jati B's power created controversy at the House because the power-purchase agreement between CEPA and PLN, which was signed in October 1996, set the price at 6.45 cents per kilowatt hour (kWh).
House members criticized the accord, demanding CEPA to reduce the price to 5.74 cents, which was the level offered by the nearby Tanjung Jati A power plant.
CEPA has set the price of power at Tanjung Jati B at 5.73 cents per kWh on the condition it was given Tanjung Jati C, whose price was also set at 5.73 cents per kWh.
House members protested the government's decision, saying 5.73 cents was still too expensive.
They said a consortium involving the Asea Brown Bovery (ABB) was ready to develop two power projects with a power price of 5.3 cents per kWh.
CEPA was initially owned by a joint venture between Gordon (80 percent) and PT Impa (20 percent).
Informed sources at the Ministry of Mines and Energy said they had brought a powerful politician and businessperson into the joint venture to enable them to receive the Tanjung Jati C power project.
Although the government had set the price of power for Tanjung Jati C at 5.73 cents, Djiteng earlier promised that PLN's team of negotiators would try to reach contractual terms which were beneficial to PLN.
He said PLN would try to further reduce the power price from the level set by Moerdiono in his letter of recommendation and set the capacity factor -- the percentage of the plant's capacity PLN was obliged to purchase -- to 30 percent.
"I believe PLN has considered its own interests as a company in drafting the terms of the contract," Sudjana said.
Analysts said yesterday's agreement with CEPA had caused a loss to PLN since the power price was higher than the price PLN offered to customers, which was about Rp 170 (three cents) per kWh.
Analysts also said by signing the agreement, PLN messed up its effort to renegotiate power prices with independent power producers.
The renegotiations have been conducted to reduce PLN's losses, which were estimated to be $500 million for next year.
During the renegotiations, PLN offered to buy power from the independent producers at a price 15 percent less than its selling price and a capacity factor of 30 percent. (jsk)