PLN welcomes Hopewell decision on Tanjung Jati
JAKARTA (JP): State electricity company PT PLN said on Tuesday that it welcomed the decision by Hong Kong-based company Hopewell to suspend its power station project in Tanjung Jati, Central Java.
PLN's president Adhi Satrya said the suspension of the 1,320- Megawatt (MW) coal-fired Tanjung Jati B power station project would help PLN rein in the excess supply of power in the country which has developed since the monetary crisis began.
"The suspension of the project is the very thing we expected," Adhi said on the sidelines of a hearing between the Ministry of Mines and Energy and the House of Representatives Commission V for mines and energy, industry and trade, manpower, cooperatives, and investment.
Hopewell said last week it had issued a force majeure notice in relation to development of the Tanjung Jati B (TJB) power station, which is currently under construction.
A force majeure is an event outside the control of all parties to a contract that may excuse any party from fulfilling its obligations.
Hopewell chairman Gordon Wu said the notice had been issued to safeguard Hopewell's investments in Indonesia, which is battling a severe financial crisis.
"The background to this notice is that current circumstances in Indonesia have led to a loss of confidence amongst financiers and/or potential financiers of the TJB project..," Wu said.
Wu did not specify when it would resume work on the project. The power station, which was initially scheduled for completion in 2000, is already 70 percent complete.
Hopewell holds an 80-percent stake in PT CEPA Indonesia, the owner of the project. The company has to date incurred costs of about HK$4.8 billion (US$420 million).
Better position
Analysts said Hopewell's decision to declare a force majeure situation as a result of the country's monetary crisis would place PLN in a better position in negotiations with other independent power producers (IPP) with which PLN had signed power purchase agreements.
They said PLN could use Hopewell's rationale to declare force majeure in other contracts into which it has entered.
As such, analysts say, PLN could justify the suspension of several power projects, the rescheduling of other power projects and the renegotiation of contractual terms with independent power producers.
PLN has signed power purchase agreements with 26 IPPs, but the government suspended 16 projects last year as part of retrenchment measures to cope with the monetary crisis.
The Tanjung Jati B power project was among ten projects which were allowed to continue.
Two owners of the 16 shelved power projects are suing the Indonesian government for suspending their projects.
PLN is seeking to reschedule the operations of the 10 power plants whose developments were allowed to continue and to lower the price at which power is purchased from them.
PLN is enduring terrible financial problems as a result of the fall in value of the rupiah in foreign exchange markets. It receives its earnings in rupiah but pays most of its costs, including the purchase of power from IPPs, in dollars.
Adhi said PLN has ordered its lawyers to determine how force majeure clauses in contracts should be interpreted.
The lawyers have been asked to find a standard force majeure claim which could be used by all parties, including PLN, he added.
"A force majeure should be standard in nature. If it is applicable to the Tanjung Jati B power project, it must be also applicable to other power projects," Adhi said.
In a related development, Minister of Mines and Energy Kuntoro Mangkusubroto said President B.J. Habibie had issued a decree to establish a team to restructure and rehabilitate PLN on Sept. 11.
The team, headed by Coordinating Minister for Development Supervision and State Administrative Reforms Hartarto Hadisoemarto, has also been charged with renegotiating the terms of IPP contracts. (jsk)