Government renegotiates IPP contracts

The government has completed renegotiations with 26 independent power producers (IPP), raising optimism that there will be no power crisis in the future.

"With the completion of the renegotiations with the IPP, we are ready to move forward. There will be no more power crises next year as some of the IPP projects will enter the stream," Coordinating Minister for the Economy Dorodjatun Kuntjoro-jakti said in a hearing with House of Representatives Commission VIII for energy, environment and science and technology.

Dorodjatun said the dispute with Karaha Bodas Company is the only case left to settle.

"The case is still under litigation by the legal representative of the Indonesian government and Pertamina. An out of court settlement is being pursued by a facilitation team," Dorodjatun added, referring to the state oil and gas company Pertamina.

Known as Tim Keppres 133, after the Presidential Decree No. 133/2001 issued to establish the team, the team was tasked to renegotiate power purchase agreements (PPA) signed by state electricity company PLN and 27 IPPs prior to the economic crisis.

The government put on hold many of the projects in late 1997 as part of the retrenchment program to cope with the economic crisis. PLN, which was financially troubled by the crisis, asked to renegotiate the PPAs, especially with regards the price.

Following the postponement of the project, some of the IPPs decided to file arbitration proceedings against PLN, Pertamina and the government, while others were willing to renegotiate the contracts.

PLN's president Eddie Widiono said PLN would save more than US$5.5 billion in costs thanks to the contractual renegotiations.

Of the 26 IPPs, 14 IPPs agreed to continue their projects under a new pricing scheme, while seven agreed to terminate the PPAs. The government and PLN each agreed to take over two projects, while Pertamina took over one project. The 26 IPPs have a combined power generation capacity of 10,615 megawatt.

As for the seven terminated PPAs, Eddie said, the government is likely to offer them to new investors.

Of the 14 IPPs, who agreed to resume their projects, seven projects are still in process and are scheduled to be finished by 2006/2007. The seven are Amurang power plant, Sibolga, Sibayak, Asahan, Paiton I, Paiton II and Sengkang.

According to Eddie, most of the 14 IPPs have agreed to sell their power at an average of 4.6 U.S. cents per kilowatt per hour (KwH) except for the diesel fired Pare-pare power plant in Makassar at 5.7 U.S. cents and Paiton at 4.9 U.S. cents.

Eddie did not disclose why Paiton would sell at a higher price for its power supply but in the case of the Pare-pare power plant, Eddie said the price was higher because it used diesel fuel.

"Diesel is more expensive than other types of fuel," he said.

Legislator Priyo Budisantoso of the Golkar party praised the completion of the renegotiation, while voicing concern that the new power price agreed upon with the IPPs were still higher than that of other Southeast Asian countries.

"It (the new price) is still not competitive. But it is better than the initial 8 U.S. cents per KwH. Thus, we appreciate the effort," he said. (*)

TABLE: Status of 27 IPPs

No.	Project Name	Fuel	Location	Capacity (MW)	IPP Company	Status
1.	Amurang	Coal	N. Sulawesi	2 x 55	PT Tenaga Listrik Amurang	Continued
2.	Asahan I	Hydro	N. Sumatra	2 x 90	PT Bajradaya Sentranusa	Continued
3.	Bedugul (unit 1,2)	Geothermal	Bali	2 x 110	Bali Energy Ltd	Continued
4.	Cikarang	Gas	W. Java	72	PT Cikarang Listrindo	Continued
5.	Drajat	Geothermal	W. Java	1 x 70	Amoseas Indonesia	Continued
6.	Gunung Salak	Geothermal	W. Java	3 x 55	Unocal Geothermal Indonesia Ltd.	Continued
7.	Paiton I	Coal	E. Java	2 x 615	PT Paiton Energy Company	Continued
8.	Paiton II	Coal	E. Java	2 x 610	PT Java Power	Continued
9.	Palembang Timur	Gas	S. Sumatra	135	PT Astrigita Prasarana	Continued
10.	Pare-Pare	Diesel	SE Sulawesi	6 x 10	PT Makasar Power Corporation	Continued
11.	Sengkang	Gas	S. Sulawesi	80	PT Energi Sengkang	Continued
12.	Sibayak	Geothermal	N. Sumatra	120	PT Dizawarta Powerindo	Continued
13.	Sibolga A	Coal	N. Sumatra	1 x 100	PT Tenaga Listrik Sibolga	Continued
14.	Tanjung Jati B	Coal	C. Java	2 x 660	PT CEPA Indonesia	Continued
1.	Cibuni	Geothermal	W. Java	10	PT Yala Teknosa Geothermal	Acquired by PLN
2.	Sarulla	Geothermal	N. Sumatra	3 x 110	Unocal Geothermal Indonesia Ltd.	Acquired by PLN
1.	Wayang Windu	Geothermal	W. Java	1x110	PT Mandala Nusantara Power	Acquired by Pertamina
1.	Dieng (unit 1,2,3)	Geothermal	C. Java	60	Himpurna California Energy Ltd.	Acquired by Government
2.	Patuha (unit 1)	Geothermal	W. Java	2 x 110	Patuha Power Ltd	Acquired by Government
1.	Cilacap	Coal	C. Java	400	PT Citra Kartika Daya	Terminated
2.	Cilegon	Coal	W. Java	1 x 400	PT Daya Listrik Pratama	Terminated
3.	Kamojang	Geothermal	W. Java	60	PT Latoka Trimas Bina Energy	Terminated
4.	Pasuruan	Gas	E. Java	500	PT East Java Power Corporation	Terminated
5.	Serang	Coal	W. Java	450	PT Power Jawa Barat	Terminated
6.	Tanjung Jati A	Coal	C. Java	2 x 660	PT Tanjung Jati Power Company	Terminated
7.	Tanjung Jati C	Coal	C. Java	2 x 660	PT CEPA Indonesia	Terminated
1.	Karaha	Geothermal	W. Java	2 x 110	Karaha Bodas Co. LLC	Arbitration