State electricity firm may terminate IPP contracts

State electricity firm may terminate IPP contracts

JAKARTA (JP): State electricity company PLN is likely to
terminate contracts with independent power producers (IPPs) who
cannot raise financing for their projects or complete them, an
official said yesterday.

A deputy of the state minister for the empowerment of state
enterprises, Sofyan A. Djalil, said PLN would not terminate the
contracts unilaterally but after negotiations with the IPPs.

Sofyan said the IPPs would be given some compensation for the
termination of their contracts but the amount would be negotiated
so that both parties would share the losses resulting from the
termination of the contracts fairly.

"The termination of the contracts is one option. During the
negotiations, the IPPs could also choose to continue their
projects after the country's demand for power increases in
several years," Sofyan said.

He, however, refused to name the IPPs which might have their
contracts with PLN terminated.

According to Sofyan, PLN has signed power purchase agreements
(PPA) with 26 IPPs but only 13 or 14 of them had managed to
secure financing for their projects. The remaining 12 or 13 IPPs
have yet to agree financial agreements with their creditors.

Sofyan said only seven of the 13 or 14 IPPs which had secured
financing for their projects were able to complete their
projects. The remaining six or seven IPPs would in all likelihood
fail to do so.

"We shall renegotiate with the seven IPPs to look for terms of
payment viable for PLN and the government," Sofyan said.

Sofyan however refused to name the seven IPPs.

Analysts say the seven IPPs are among the 10 IPPs which were
allowed to continue their projects last year by former President
Soeharto despite the monetary crisis.

The 10 IPPs include PT CEPA Indonesia, the developer of the
1,320 Megawatt (MW) Tanjung Jati B coal-fired power plant; PT
Energi Sengkang, the developer of the 135-MW Sengkang gas-fired
combined cycle power plant in South Sulawesi; PT Jawa Power, the
developer of the 1,220-MW Paiton II coal fired power plant in
East Java; PT Makassar Power Co, the developer of the 60-MW Pare
Pare diesel power plant in South Sulawesi.

Other IPPs on the list of the 10 are PT Mandala Nusantara
Power, the developer of the 220-MW Wayang Windu geothermal power
plant; PT Paiton Energy Company, the developer of the 1,230 MW
Paiton I coal-fired power plant; PT Tenaga Listrik Amurang, the
developer of the 110-MW Amurang coal fired power plant in North
Sulawesi; PT Tenaga Listrik Sibolga, the developer of the 200-MW
Sibolga A coal-fired power plant in North Sumatra; Unocal
Geothermal Indonesia Ltd, the developer of the 165-MW Salak
geothermal power plant in West Java; and PT Himpurna California
Energy, the developer of the 140-MW Dieng geothermal power plant
in Central Java.

All the power projects are controlled by foreign power
companies, except for the Sibolga A and Amurang power plants
which are wholly owned by tycoons Ibrahim Risyad and Joediono
Toshin.

Two of the 10 -- the Salak and Sengkang power plants -- have
come on stream, while the Dieng, Paiton I, Paiton II, Wayang
Windu and Pare Pare power plants are now under construction and
scheduled to come on stream later this year or next year.

CEPA recently announced that it had postponed the development
of Tanjung Jati B for one to two years until the Indonesian
economy recovers.

Industry sources say PT Tenaga Listrik Amurang and Tenaga
Listrik Sibolga were facing difficulties to continue the Sibolga
A and Amurang power projects due to the problems in the country's
banking industry.

The two power plants, which both were valued at Rp 1.59
trillion (US$122 million) in 1996, are the only ones among the 26
power projects which are financed by local banks. The banks
include Panin Bank, Bank Central Asia (BCA), Bank Bali, Bank
Expor Impor Indonesia, Bank Universal, Bank Niaga, Bank
International Indonesia (BII) and Bank Umum Nasional (BUN). (jsk)