Power plant project go to ahead: AsiaPower

Power plant project go to ahead: AsiaPower

WELLINGTON (Reuters): Construction is progressing on the first phase of a geothermal power plant in Indonesia that could be one of the biggest of its type in the world, despite political uncertainty over the future of the nation's power purchase deals, New Zealand company AsiaPower said yesterday.

AsiaPower, an associate of Brierley Investments Limited (BIL), has an 85 percent interest in the Wayang Windu generation project.

Its local partner has some links with former president Soeharto's youngest son Hutomo "Tommy" Mandala Putra.

It is set to become one of Indonesia's so-called independent power producers (IPP), which sell power to state utility PLN.

However, PLN is currently under intense local political pressure to renegotiate the pricing of long-term power purchases with IPPs, set in U.S. dollars, as they risk ruining it due to the collapse in the rupiah against the dollar in the last year.

AsiaPower chief executive Chris Flavell declined to comment on the prospect of the supply contract already in place for Wayang Windu being reworked.

"We are still proceeding with construction," he told Reuters in a telephone interview, adding he had no comment on the future of the supply contract with PLN.

Japanese contractors Sumitomo Corp and Fuji Electric Co Ltd won a 29 billion yen contract last July to build the first two phases of the project.

Phase one - 110 megawatts worth of generating capacity - is due to be completed by the end of this year.

"Commissioning will be in March 1999," Flavell said, adding that issue of the pricing of power was not pressing for the time being.

The project's two banks, Deutsche Morgan Grenfell and Credit Suisse First Boston, continued to provide financing for construction, which he said was "not an issue".

On Wednesday credit rating agency Standard & Poor's included Wayang Windu among four IPPs whose project finance ratings it continued to hold on creditwatch "with negative implications".

A $250 million bank loan for the project, through MNL Indonesia Funding Corp, is rated CCC by S&P and has been on creditwatch since December 1997.

"The ratings reflect the increasingly severe uncertainties facing both Indonesia and the specific debt-issuing projects," S&P said.

Earlier this year, Flavell said that the Wayang Windu venture has a so-called 'take or pay' contract with PLN based on it selling power starting at 7 U.S. cents per kilowatt hour and stepping down over a 30 year period.

Some legislators in Indonesia have charged that many of the country's IPPs used questionable means to win favorable treatment during the reign of Soeharto, who resigned late last month amid the country's worst crisis in decades.

In recent weeks PLN has begun seeking to unwind deals with some of the IPPs which the Soeharto family controlled. That process has been encouraged by many members of parliament who believe they should be changed in the public interest.

PLN said on Thursday that it intended to act in accordance with the law when considering revoking any IPP contracts.

"We have no intention of revoking contracts without a legal basis," a senior official said.

Separately, Tomen Corp said in Tokyo yesterday it had received no new word from Indonesia on a stalled power plant project in Java, despite calls from parliamentarians for such projects to be renegotiated or scrapped.

The 1.32 million kilowatt (kw) coal-fired power plant, the Tanjung Jati A project, is one of a number of power projects in Indonesia that have been postponed by presidential decree.

"We haven't been contacted by the Indonesian government (since January)," a Tomen spokesman said. "We are waiting for communication from the Indonesian government, so that we can resume work on the project."

Tomen and National Power Plc, the Tanjung plant's two foreign investors, each have a 30 percent stake in the project.

The remaining 40 percent is shared equally by Indonesian firms Bakrie Power Corp and Maharani Paramitra, which is owned of one of Soeharto's daughters.

The Tomen spokesman said the launch of the power plant, initially set for 2001, would be delayed.

Mitsui & Co Ltd , which is taking part in Indonesia's Paiton I coal-fired power plant project, said it had not received word from Jakarta on a review of the project.