Threats do the trick as power prices come down

JAKARTA (JP): Strong pressure from the Coordinating Minister for Economy and Finance Saleh Afiff may have finally persuaded three consortiums led by foreign power giants that it is better to bring down their prices then it is to lose their projects.

"Their willingness has been reflected in letters, which were sent today to the state electricity company PLN," David Tombeg, PLN's spokesman, told The Jakarta Post here yesterday.

Tombeg said the consortiums pledged at a meeting with PLN last week to finish new feasibility studies on price reductions and submit new proposals by May 1.

"Their responses are encouraging but I cannot tell you the details of the letters because PLN should study the proposals carefully," he said.

This is just the most recent installment in a saga that two weeks ago saw Minister Afiff block the firms' attempts to secure export credit.

The government granted the three projects last year on a non- competitive, repeat order basis, in a move it said would speed up construction and head off a looming power crisis.

In recent months, however, dissatisfaction within the government over the prices led to an announcement that the orders would be canceled and the projects thrown open to competitive bids.

Early last month, the cancellation was canceled when the consortiums agreed to lower their prices from a total of US$2.14 billion to $1.76 billion. Afiff was still not satisfied, perhaps prompted by GEC Alsthom International's assertion that it could shave $410 million off the total cost, and urged the consortiums to make further cuts.

PLN is scheduled today to hold a meeting to discuss the new proposals, Tombeg said.

"On May 1, we should have sent our response to the new proposal to Minister of Mines and Energy Ida Bagus Sudjana and Minister Afiff," he said.

The consortiums are Asea Brown Bovery (ABB) of Switzerland and Japan's Marubeni, to build a 982-megawatt (MW) combined-cycle power plant at Muara Tawar in West Java, Japan's Sumitomo and General Electric of the U.S., to set up a 505-MW one-cycle power plant at Tambak Lorok in Central Java and Japan's Mitsubishi and the German Siemens, to establish a 855-MW combined-cycle power plant at Grati in East Java. (fhp)