State Electricity Company ordered to renegotiate project prices

JAKARTA (JP): The plot has thickened in the case of the three power projects granted without competitive bids, with State Minister for Economic and Financial Affairs Saleh Afiff turning down their foreign-led consortiums' requests for export credit access.

"My studies concluded that the prices offered by the three foreign consortiums are still much higher than the average price of similar projects implemented by PLN through competitive bidding," Afiff said in a letter to the state power company (PLN) president on April 16.

The letter, which was also sent to the state minister for development planning and the chairman of the National Development Planning Agency (Bappenas), was his reply to PLN president Zuhal's request for export credit for the three.

The government early last month withdrew its threat to take away the three gas and steam power plant projects, granted on a repeat-order basis, after the contractors agreed to lower their bidding prices from a total of $2.14 billion to $1.76 billion.

The 982-megawatt Muara Tawar combined-cycle (steam and gas) power project in West Java was awarded to the team of Germany's ABB and Japan's Marubeni, the 505-megawatt Tambak Lorok one-cycle project in Central Java to Japan's Sumitomo and America's General Electric and the 855-megawatt Grati combined-cycle power project in East Java to Japan's Mitsubishi and Germany's Siemens.

The state electricity company has repeatedly argued that the three projects were awarded on a repeat-order basis because construction would be faster than if competition were allowed. The company said it has to deal with a looming power shortage.

New bid

Informed sources at the Ministry of Mines and Energy said that the order for PLN to renegotiate the prices of the projects had been prompted by the bid submitted by GEC Alsthom International at a meeting with the ministry's secretary general, inspector general and the head of the ministry's planning bureau.

The representative of the Anglo-French power giant submitted a bid of $1.35 billion for the three projects, $410 million lower than the total bidding prices offered by the three consortiums. The bidding price offered by GEC Alsthom is on a full turnkey basis, including complete equipment, erection, civil works and substations, the sources said. (vin)