Legislators may block OPIC deal

Chairman of the House of Representatives (DPR) economics commission said yesterday the legislature was likely to block government plans to pay $290 million to the US Overseas Private Investment Corp (OPIC).

The disputed payment is linked to controversial power purchase deals signed by state-owned electricity company PT Perusahaan Listrik Negara (PLN), which were made in the last years of autocratic former President Soeharto's rule, which ended in 1998.

PLN has been pressing to change what it considers punitive agreements foisted on it by a corrupt regime, but has met strong resistance from the United States, several of whose companies are involved, which insists the agreements are legally valid.

"The state of the country's finances is already in such a mess. Coupon payments on the bank recapitalisation bonds and the cost of servicing foreign debts are already punitive," commission head Benny Pasaribu told Reuters.

"These costs will certainly rise in the future. Parliament is unlikely to approve the move as it would further hurt the country's budget for years to come."

PLN president director Kuntoro Mangkusubroto on Thursday said the government had agreed to pay OPIC a $290 million outstanding insurance claim.

But Finance Minister Prijadi Praptosuhardjo said there was no decision yet on whether Jakarta would pay a $290 million outstanding insurance claim to the US Overseas Private Investment Corp (OPIC).

Prijadi's comments contradicted earlier statements by the head of state electricity firm PT PLN that the government would pay.

"I don't know yet. These affairs belong to the Mines and Energy Ministry," Prijadi said told reporters when asked about the payment.

Asked if there was no decision yet, he said: "Yes."

PLN is fighting to restructure the agreements.

The OPIC case involves MidAmerican Energy Holdings, which filed for arbitration against PLN after the state utility refused to pay for electricity from MidAmerican's geothermal plant in Central Java and after the government suspended its other plant in Patuha, West Java.

An independent panel ordered PLN - which is embroiled in disputes with several independent power producers - to pay MidAmerican $572 million.

Although a Jakarta Court nullified the arbitration on a technicality, OPIC - an agency of the U.S. government - paid MidAmerican $290 million, or almost half the claim.

The government said last August it was seeking approval from the parliament to pay the claim. (*)