PT PLN reaches temporary agreement with Paiton

PT PLN reaches temporary agreement with Paiton

JAKARTA (JP): State electricity company PT PLN said on Monday
it had reached a temporary agreement with independent power
producer (IPP) Paiton Energy on their contractual dispute and
expected to find a final solution within 10 months.

PLN president Kuntoro Mangkusubroto said after reaching the
interim agreement, renegotiations on the power purchase contract
between PLN and Paiton would start next month.

"The renegotiations will start next month and are expected to
be completed in 10 months," Kuntoro said during a hearing with
the House of Representatives Commission VIII, which oversees
mines and energy.

He said the negotiations with Paiton were conducted by the
government, not PLN.

Kuntoro said the interim agreement pertained to the price of
power supplies from Paiton to PLN until they reached a final
solution to their dispute.

He also said PLN had reached an interim agreement with other
IPPs that had come on stream.

According to PLN's data, of the 27 IPPs that had signed power
purchase agreements, three have begun operations.

They are the 135-Megawatt (MW) combined cycle power plant in
Sengkang, South Sulawesi; the 165-MW geothermal power plant in
Salak, West Java; and one 615-MW unit of the 1,230 coal-fired
Paiton I power plant in Probolinggo, East Java.

Under the contracts, Sengkang charges PLN 6.7 U.S. cents per
kilowatt hour (kWh) for its power supplies for 20 years; Salak
charges an average of 6.6 cents per kWh for 30 years; while
Paiton charges an average 7.3 cents for 30 years.

Kuntoro said thus far the IPPs and PLN had agreed on two
interim payment schemes until the completion of the
renegotiations.

He said under the first scheme, PLN bought the IPPs' power
supplies at the exchange rate of Rp 2,450 per U.S. dollar, as
against the current rate of Rp 7,450 per dollar.

Under the second scheme, PLN buys the power supplies from the
IPPs at the price individually agreed upon by PLN with each of
the IPPs.

Kuntoro, however, refused to specify which scheme was chosen
by Paiton and other IPPs in their interim agreements with PLN.

He said the right to disseminate information on the agreements
did not lie with PLN, but the government.

"What is important is that during the 10 months of the interim
agreement period, PLN and the IPPs agreed not to file any suits
against each other until a long-term agreement was reached, " he
said.

PLN was one of the state companies heavily affected by the
economic crisis since it sells power in rupiah and spends most of
its costs, including the cost of the purchase of power supplies
from IPPs, in dollars.

The company has been seeking to renegotiate its contracts with
the IPPs, including a request for the IPPs to lower their power
prices.

After a year of unproductive negotiations with Paiton, PLN
filed a lawsuit in October last year to nullify its contract with
Paiton, causing an international controversy.

To avoid further controversy, President Abdurrahman Wahid
ordered PLN to drop the lawsuit, saying the suit hurt relations
with foreign investors.

The government subsequently formed a new renegotiation team to
deal with PLN's dispute with the IPPs.

Heading the team is Coordinating Minister for the Economy
Finance and Industry Kwik Kian Gie, with Minister of Mines and
Energy Susilo Bambang Yudhoyono, State Minister of Investment and
State Enterprises Development Laksamana Sukardi and Minister of
Foreign Affairs Alwi Shihab as members.

Paiton Energy is a joint venture between Japan's Mitsui
Corporation (32.5 percent), General Electric (12.5 percent),
Edison Mission Energy of the United States (40 percent) and local
company PT Batu Hitam Perkasa (15 percent). (bkm)