27 IPPs bribe officials to get their projects approved

The head of the House of Representatives' private electricity team, Emir Moeis, revealed that 27 independent power producers (IPP) had spent US$15 to 50 million to bribe officials at various levels to get their projects approved, Suara Pembaruan reported on Saturday.

Consequently, those private power producers marked their projects and demanded high electricity prices to recover their lost money, Emir said. But he called on the Attorney General's Office to investigate such ill practices and prevent the producers to burden their corruption costs to the people.

With such investigations into corruption, collusion and nepotism practices at those IPPs, the Attorney General's Office would give moral boost to state electricity company PT PLN in its re-negotiation over electricity prices from those private producers.

"Up until now, we have not yet found any evidence about the bribes. But after reviewing various documents, and hearing testimonies from related officials, I found certain amount of funds that could not be accounted. I suspect that those funds have been used for bribes," he said.

For instance, PT Paiton Energy Company, that owns Paiton I coal-powered power plant in East Java, spent US$50 million for development costs. But the company could never explain in details what the development costs were.

Another example came from the unaccountable spending by PT East Java Power Co., that owns Pasuruan coal-powered power plant, also in East Java. Although the company had not started any physical development activities, it had spent US$15 million. Again, this spending was not accounted, Emir said.

Emir's finding was in line with the report from the Supreme Audit Agency (BPK) that found mark-up practices in a number of power projects, including Paiton I, Paiton II, and other power projects outside Java.

BPK said that the total value of 2 X 615 megawatts Paiton I project had been marked up drastically to US$2.5 billion, while the agency considered Paiton I's normal value at $1.3 billion. Because of the mark-up, Paiton I charged PLN 8.48 U.S. cents per kilowatt hour (kWh) of electricity. But BPK considered the fair price of Paiton I electricity at 4.21 cents.

BPK also found that the 1,220 MW Paiton II project had been marked up to $1.98 billion from its fair value of $1.38. And its electricity prices have been set at 6.6 cents per kWh, far above its fair value of 4.36 cents. (*)