PLN undecided on power buying deal with CEPA

JAKARTA (JP): State-owned electricity company, PT Perusahaan Listrik Negara (PLN), has yet to decide if it will buy electricity from the Tanjung Jati "B" power plant at a price lower than initially agreed upon.

PLN's director for planning P. Sihombing confirmed that the company has received a proposal from the plant's contractor, PT Consolidated Electric Power Asia (CEPA) Indonesia, offering to sell electricity from the Tanjung Jati "B" power plant to PLN at US$0.0645 per kilowatt hour (kWh), or $0.009 lower than the $0.0735 initially agreed upon in 1994.

However, he said, the issue cannot be dealt with immediately as PLN is waiting for government approval of its intention to cancel its power purchasing agreement with CEPA.

PLN's proposal is currently in the hands of President Soeharto, Sihombing said.

"CEPA, as the contractor of the Tanjung Jati 'B' power plant, is free to propose a price reduction, but we have not come up with a decision because our proposal to end PLN's power purchasing agreement with CEPA is now being processed by the government," he said, as quoted by Antara.

He declined to explain the basis of PLN's proposal to cancel the power purchasing agreement, in which the contractor will operate the plant under a build-operate-and-transfer scheme.

Earlier reports, however, said that PLN regarded the price offered by the Hong Kong-based CEPA -- $0.0735 per kWh -- as too high.

By comparison, the Sibolga "A" power plant is expected to sell its electricity to PLN at $0.0655, and the Paiton II power plant at $0.066 per kWh.

Reports also said that the construction of the 1,300-megawatt Tanjung Jati "B", to be located in Jepara, Central Java, was also considered too expensive, with investments reaching as high as $1.77 billion.

By comparison, the Tanjung Jati "A" steam-powered plant -- with a similar capacity -- was built with $1.66 billion.

Apart from that, PLN also appeared disappointed with the decision by CEPA to move the site of the Tanjung Jati "B" plant from the initially-agreed upon location of Bondo village in the Jepara regency.

The reports said CEPA faced problems in land appropriation in the village, forcing it to shift to Tubanan village in the same regency. In the latter village, however, CEPA reportedly faced new problems as the land is productive agricultural land.

Despite the problems, CEPA President Djan Faridz was confident that construction would go smoothly at the Tanjung Jati "B" plant in Tubanan village, which is slated for completion by the end of 1998.

Djan said Sumitomo Ltd. has been appointed the main contractor for the project while funding will come from Sumitomo and a syndication of seven banks, led by Citibank.

Djan considered the electricity price offered by CEPA was not expensive, given that his company had already proposed to cut back the selling price to $0.0645 per kWh.

"This reduction will help PLN save $87.46 million," he said.

He said the reduction was possible since the income tax had been cut down from 35 percent to 30 percent. CEPA, he added, was also able to cut back on other costs. (pwn)