PT Paiton denies marking up prices at power plant
JAKARTA (JP): PT Paiton Energy Company, which is building the Paiton I power plant in Probolinggo, East Java, denied on Tuesday charges of mark-up practices leveled by state electricity company PT Perusahaan Listrik Negara (PLN).
Tycoon Hashim Djojohadikusumo, who is the co-owner of the 1,230 megawatt (MW) power plant, said the company had set a high price for its power supplies to PLN due to the high investment costs spent by the company on the project.
He said the high investment costs were due to creditors who had imposed a high interest rate on its loan to Paiton Energy for the project given Indonesia's political instability.
"The (high) price is not because of mark-up practices, but due to high investment costs as the result of the country's political instability," Hashim told reporters.
He said the company's creditors, Japanese Exim bank and US Exim bank, audited the project to ensure there were no dubious deals before providing the loan.
Hashim was commenting on the statement by PLN's president Adhi Satriya that Paiton Energy had committed "worldclass" mark-up practices in setting the price for its power supplies.
Paiton Energy is owned by American companies Mission Energy and General Electric in partnership with Japan's Mitsui and local company PT Batu Hitam Perkasa, controlled by Hashim.
Under the 30-year power purchase agreement (PPA) signed in 1994, PLN has to buy power from Paiton Energy at 8.4 cents per kwh in the first six years, at 8.2 cents during the next six years and 5.4 cents for the remaining 18 years.
Adhi said based on the international pricing formula, the reasonable prices for the power supplies from Paiton I was about 3.5 cents per kwh
Adhi also said PLN is collecting evidence to prove mark-up practices allegedly conducted by Paiton Energy and other independent power produces (IPP) and will ask courts to annul the contracts if the mark-up practices were proved.
He also said PLN would take legal action against PLN's former leader who was responsible for the awarding of the PPAs that carry unreasonably high prices.
PLN has signed 27 PPAs with IPPs which are mostly joint ventures between international energy companies and former President Soeharto's family and cronies.
Adhi made the statement following a stalemate in the negotiations between PLN and several IPPs, including Paiton Energy and PT Jawa Power on the possibility to reduce their power prices.
PT Jawa Power is owned by Siemens of Germany, PowerGen of Britain and local company PT Bumipertiwi Tatapradipta, controlled by former President Soeharto's son Bambang Trihatmodjo.
It is developing two power units -- popularly known as Paiton II -- close to Paiton I with a combined power generation capacity of 1,220 MW.
PLN signed a 30-year PPA with Jawa Power in 1995 under which the former will buy power from the latter at 6.59 cents per kilowatt hour.
Hashim admitted that PLN and Paiton Energy and several other IPPs could face deadlock in the contract renegotiation talks.
He warned that the home country governments of the IPPs, including the American, Japanese, German and British governments, could step in to help settle the dispute if the talks between the IPPs and PLN were deadlocked.
"The dispute could most probably be settled in government-to- government talks," Hashim said. (jsk)