Foreign-funded power projects marked up: PLN
Thursday, October 19 2000 - 04:00 AM WIB
State electricity company PT PLN confirmed on Wednesday the discovery of possible markups totaling US$400 million in the country's foreign-funded power transmission projects.
PLN president Kuntoro Mangkusubroto said most power transmission projects financed by foreign export credit facilities, known as KE, smacked of markup practices.
"All KE projects are problem sources ... we found that on average they cost 37 percent more compared to projects that underwent international tenders," Kuntoro said during a meeting with House of Representatives Commission VIII for energy affairs.
Fifteen out of 17 power transmission projects are being developed in anticipation of a surge in power supplies following the completion of power plants by independent power producers (IPPs).
The 15 projects, or lots, cover Java, North Sumatra, West Sumatra and South Sulawesi.
Kuntoro was responding to a report by the Indonesian Corruption Watch (ICW), which said it had uncovered markups in these lots.
The credit export facilities provided by foreign banks to the 17 projects reached a total of $600 million, far higher than their estimated real value of $200 million, according to ICW.
Kuntoro said he would study further ICW's finding.
Last week PLN reported its own findings on two of the 17 lots, saying it had found strong indications of markup practices.
Kuntoro said that based on the findings, the power transmission projects in Kediri, East Java, and Tasikmalaya, West Java, respectively cost the government 283 percent and 315 percent more than a similar project in Depok.
The Tasikmalaya project is being developed by the consortium of PT Ritra Safitri and PT Citacontrac at a cost of Rp 386.91 billion (about $43 million at the current rate).
The Kediri project is being developed by the consortium of PT PP and PT Indokomas at a cost of Rp 342.28 billion.
A similar project which will be developed in Depok this year will cost about Rp 136.7 billion. The international tender for the development of the project was won by a consortium of Alstom, Mitsubishi and PT Multifab.
Kuntoro said he had launched an internal investigation of the two projects, which were approved by former PLN president Djiteng Marsudi in 1998.
"Everyone involved in the projects is subject to the investigation," he said.
But he added that PLN would let the government and the House decide whether to renegotiate, retender or cancel the two projects.
However, delaying the Kediri project would mean taking the risk of causing a shortage in the power supply to East Java, he warned.
He said that a new tender would set back the Kediri project by eight months, during which power demand would outstrip PLN's present capability to distribute power.
By then, he said, independent power producer Paiton II would have completed its power plant, but would not have adequate transmission infrastructure to distribute the power.
Retendering either of the two projects would also entail the difficulty of finding new creditors, Kuntoro added.
The Frankfurt-based creditor Kraftanstalt for Wiederaufbau (KfW) is funding the Tasikmalaya project, while the Kediri project is being funded by the French-based Banque Paribas.
He said that neither KfW nor Banque Paribas would continue financing the projects if the government decided on a retender. (*)