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)