OPIC claims to be paid in 2004

The government would start paying the $260 million claim from Overseas Private Investment Corp. (OPIC) of the United States in year 2004 if the government goes ahead with its current rescheduling terms, according to the director of budget at the Ministry of Finance, Anshari Ritonga.

"That will only happen if the payment scheme through rescheduling is approved by the Indonesian government," Ritonga was quoted by Kompas daily as saying at a hearing with the House of Representatives' Budget Commission on Monday (June 11).

Ritonga explained that according to the terms of payment for OPIC claim, the government would be given a three-year grace period to settle the claim. It means that the government will have to start paying the claim in year 2004.

Therefore, Ritonga noted that the payment of OPIC claim would not burden the current 2001 state budget.

The claim from OPIC arose following PLN's inability to pay independent power producer MidAmerican Energy Holding, formerly known as CalEnergy, $572 million in compensation as ordered by an independent arbitration panel.

In September 1998, MidAmerican filed arbitration proceedings against PLN after it refused to pay for electricity from MidAmerican's geothermal power plant in Dieng, Central Java, and after the government suspended MidAmerican's power plant in Patuha, West Java. PLN lost the arbitration and was ordered to pay MidAmerican $572 million in damages.

PLN refused to pay the claim. This forced MidAmerican to call in its OPIC insurance. OPIC then demanded the Indonesian government to pay $298 million, but then after negotiations, it agreed to reduce the claim to $290 million. OPIC then reduced it further to $260.

Following pressures from OPIC and allegedly also from the U.S. government, the Indonesian government, through Coordinating Minister for the Economy Rizal Ramli, agreed on May 1 to pay the claim through a settlement note that would allow the government to restructure the payment of the claim.

Ritonga warned that besides the $260 claim from OPIC, there are also obligations of Patuha and Dieng power plants that must be settled.

"Besides the payment through the rescheduling, there are also problems on who will tackle the remaining claims from OPIC, and also other obligations. This has become our thinking," Ritonga said.

Earlier Minister of Energy and Mineral Resources Purnomo Yusgiantoro and Minister of Finance Prijadi Praptosuhardjo warned that the payment of the OPIC claim through the settlement note would not solve the problem as it would not solve all problems surrounding the disputed Patuha and Dieng plants.

Purnomo noted that in addition to OPIC claim, there is also a claim of US$140 million coming from the creditors of Patuha and Dieng power plants. The claim is currently being negotiated by state electricity company PT PLN and the government.

Finance Minister Prijadi has also called on Rizal Ramli to reject the settlement of the Patuha and Dieng power projects problems through the settlement note and communicate the settlement note mechanism to the House of Representatives. (*)