PLN's plan to buy out Tanjung Jati B confirmed

JAKARTA (JP): A senior minister said on Thursday that state- owned electricity company PT Perusahaan Listrik Negara (PLN) was considering buying out the coal-fired Tanjung Jati B power plant to cut potential future losses.

Coordinating Minister for Development Supervision and State Administrative Reforms Hartarto Sastrosoenarto is currently seeking to secure loans to finance the buyout.

"There are a lot of alternatives. The most important thing is that PLN can buy power at reasonable prices. This can be reached through price renegotiations or securing loans (for the buyout)," Hartarto said.

Hartarto was commenting on a statement from PLN's former president, Djiteng Marsudi, that he had asked the Japanese government to provide loans under the Miyazawa Plan for PLN to buy out the giant power plant.

Hopewell Holdings Ltd. of Hong Kong owns 80 percent of the 1,330-Megawatt (MW) coal-fired power plant located in Central Java.

The remaining stake is held by PT Impa Energy Co, owned by Djan Farid, a businessman known to have links with the daughter of former president Soeharto, Siti Hardiyanti Rukmana.

PLN data said the project would cost US$1.7 billion. Under the power purchase agreement, PLN would buy power from the plant at the price of 6.45 U.S. cents per kilowatt hour (kwh).

Speculation is rife that Siti Hardiyanti's involvement was a factor in the planned buyout.

Djiteng called on the government to disallow use of the Miyazawa Plan's fund for the buyout.

"The Miyazawa Plan's fund is a Japanese government loan to help the government improve the country's battered economy. Why should the fund be used to buy out the plant?

"If the government implements the plan, that amounts to a betrayal of the Indonesian people."

Djiteng said the fund would be better used to provide more electricity to rural areas.

However, Hartarto and PLN's director Adhi Satriya considered the buyout plan a good alternative among various options considered by PLN in its renegotiations with the independent power producers.

PLN, which has been severely affected by the monetary crisis, is seeking to ease its financial burdens by renegotiating power supply costs from the independent power producers (IPP).

PLN has signed agreements to buy power from 27 IPPs for between 5.7 cents and 8.4 cents per kwh, much higher than its average selling price of Rp 233 (3.4 cents) per kwh. In comparison, power produced by IPPs in Thailand costs on average 3.4 cents. In the Philippines the price averages 4.4 cents.

Djiteng has repeatedly claimed that PLN's management had no alternative but to accept unreasonably high prices, as a result of pressure from politically well-connected people cooperating with the international power producers in the projects.

Adhi said in a statement that negotiations with the owner of the Tanjung Jati B power plant were in progress.

"We are happy with the speedy progress in the negotiations with Tanjung Jati B ... (it) could be taken as a model for negotiations with other IPPs

"This shows that Tanjung Jati B really understands the problems faced by PLN as the power supplier to the Indonesian people, especially during the economic crisis," Adhi said.

He said several parties were unhappy with the progress made by PLN in negotiations with Tanjung Jati B and had tried to undermine the negotiations.

"From the beginning, we anticipated that the proceedings would not please parties which had forced PLN to accept unfair, unreasonable contract terms." (jsk/prb)