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.