PLN welcomes Hopewell decision on Tanjung Jati

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)