PT Paiton secures $1.82b deal for East Java project
PT Paiton secures $1.82b deal for East Java project
JAKARTA (JP): Indonesia's infrastructure privatization drive has received a major boost as the country's first major private power project, owned by PT Paiton Energy Company (PEC), closed an offshore-syndicated financing deal worth US$1.82 billion.
"This agreement is a landmark step for Indonesia, demonstrating the confidence of the international financial community, not only in the economy as a whole, but in the privatization of the nation's infrastructure," said Hashim Djodjohadikusumo, PEC's chief commissioner.
Hashim made the remark in a company press release issued after the final agreement on the project's financing scheme was signed in New York last week.
PEC controls a 1,230 megawatt coal-fired power plant in East Java. The project, worth $2.5 billion and known as Paiton Private Power I, is scheduled to start commercial production by 1998.
Ground was broken in September at Probolinggo, an East Javanese city close to the project site, for the first phase of the plant.
PEC is comprised of a consortium consisting of Mitsui Co. of Japan (with 32.5 percent), General Electric Corporation (20 percent) and Mission Energy Company (32.5 percent) of the United States and Indonesia's PT Batu Hitam Perkasa controlled by Hashim (15 percent).
The state electricity company, PT PLN, has signed a 30-year power purchasing contract with PEC, which will charge 8.56 US cents per kilowatt hour for the first six years, 8.41 cents for the next six years and 5.54 cents for the final 18 years.
In other words, PEC's tariff structure has an average purchase price of 8.37 cents at 1998 prices.
Sidharta Martoredjo, a director of PEC, told The Jakarta Post yesterday that, within Paiton's financing scheme, The Export- Import Bank of both the United States and Japan will provide a combined loan of $1.44 billion.
The U.S. government-backed Overseas Private Investment Corp. will provide a further $200 million, he said.
Tough
Sidharta, a partner in Batu Hitam, said that the two Exim Banks had never cooperated before to finance an infrastructure project.
"This is why the negotiations have been so tough. Our biggest lenders had never previously been involved in a private infrastructure deal," he said.
"The creditors initially insisted on additional government guarantees...but we managed to convince them and met the final deadline on April 21st," he said .
Sidharta said that the residual $180 million loan would be extended by eight multinational commercial banks: Chase Manhattan, Bank of America, Industrial Bank of Japan, Fuji Bank, Sakura Bank, Union Bank of Switzerland, Barclays Bank of the United Kingdom and Credit Lyonnais of France.
"The remaining $680 million will come from PEC's equity investments," he added.
The Indonesian government is planing to build seven power stations with a total capacity of 2,600 megawatts starting this year.
The proposed projects are part of the government's plan to add around 30,000 megawatts to the national power supply by 1999, at an estimated cost of $8 billion.
Other projects
The government, in the meantime, has awarded two other major private power projects which are expected to generate 1,600 megawatts in total at a total investment of $2.6 billion.
The larger of the two new ventures went to the Jawa Power Consortium, which will build a 1,200 megawatt coal-fired power generation plant worth about $2.1 billion, known as Paiton Private Power Project II, near the site of the PEC plant in Paiton, East Java.
Jawa Power is comprised of Siemens AG of Germany (controlling 50 percent), PowerGen of Great Britain (35 percent) and Indonesia's Bimantara Group (15 percent).
Once operation has commenced in 1999, Jawa Power's average power price is expected to reach about 6.4 US cents per kilowatt hour.
The other private power project, a 400 megawatt coal-fired generator in West Java worth about $500 million, went to a consortium made of Italy's Ansaldo, North Resources Group of the U.S., and Indonesia's Kiani Tujuh Dua, which is controlled by timber baron Mohammad Hasan.
This consortium is expected to sell their power at an average tariff of 6.1 US cents per kilowatt hour.
Sidharta Martoredjo of PEC said yesterday that the latter projects could afford to charge lower rates because they were late-comers to the private power industry.
"We have to charge a higher rate because we are the pioneers," he said.
In the meantime, economist Mari Pangestu warned yesterday that private power tariffs must be determined in a transparent manner.
"A higher electricity price is, of course, important to create incentives for private power investors...but the rates must be decided openly so that the consumers are also protected," she told the Post.
Mari also called for continued government vigilance on inflation which, she said, could result from higher power costs. (hdj)