SINGAPORE (Dow Jones): Indonesian independent power producer

SINGAPORE (Dow Jones): Indonesian independent power producer
PT Jawa Power is seeking around 5 U.S. cents a kilowatt-hour, or
kWh, in long-term contract negotiations for electricity generated
by a 1,220-megawatt plant in East Java, up from 3 cents/kWh
agreed in an interim contract.

Ralf Lucht, president and director of Jawa Power, told Dow
Jones Newswires that a rate of 5 cents/kWh is required so
investors can start repaying loans for the US$1.7 billion Paiton-
II project.

The rate agreed in the interim contract with Perusahaan
Listrik Negara, or PLN, a state-owned electricity company, falls
short of covering loan payments and shareholders' dividends,
Lucht said.

Jawa Power recently extended the interim agreement originally
covering the first-half of 2001 to the end of October, with a
marginal increase of 2 percent - 3 percent in the rate for
electricity delivered in the July-October period, he said.

While Jawa Power hopes to see new long term rates in effect
from November, it is ready to further extend the interim
agreement if necessary, Lucht said.

But the interim rate only covers interest payments and partial
operation and maintenance costs of the Paiton-II power project,
he said.

Jawa Power - 50 percent-owned by Germany's Siemens Power, 35
percent by the UK's PowerGen PLC., and 15 percent by local
company PT Bumipertiwi Tatapradipta - is scheduled to start
payments on principal of its capital loan in January 2002.

The rate of 5 cents/kWh sought by Jawa Power is 16.6 percent
below the level PLN is contractually obliged to pay under the
original power purchasing agreement, Lucht said.

Acting on "goodwill," Jawa Power agreed to revise its selling
price down, but hopes to maintain a level that it deems
economical for its shareholders to continue operations in
Indonesia, he said.

PLN, however, is hoping to achieve a rate below 5 cents/kWh,
as subsidized electricity tariffs in Indonesia remain among the
lowest in Southeast Asia.

The state company has identified Pation-II as one of the "big-
three" projects it is focusing on, PLN finance director Parno
Isworo said late Monday.

Parno acknowledged the urgency of finalizing the ongoing
negotiations, so that new investors can be drawn to develop the
power generating capacity needed to avoid serious shortages
projected by 2003.

Jawa Power is striving to reach a consensus with PLN on a
revised 30-year rate for the electricity it supplies from its two
610-megawatt coal-fired power generating units before the end of
the year, Lucht said.

If Indonesia rejects the 5 cents/kWh rate, and "forces Jawa
Power to reduce tariffs to a level that is not possible to
maintain operations," the independent power producer will have no
choice but to revert to terms outlined in the original contract,
he said.

In the worse case scenario, there is the "risk of turning to
arbitration for a resolution," Lucht said in response to a query
from Dow Jones Newsires.

"But that is only if shareholders are left with no choice,
because Jawa Power is committed to Indonesia in the long-term,"
he said.