Paiton Energy to expand generating capacity: Report

Independent power producer PT Paiton Energy is planning to expand its power generation capacity by 700 megawatts or double its current power generating capacity to mitigate losses sustained in its power investment, Robert Edgell, president of Edison Mission Energy Asia, told Dow Jones Newswires Tuesday.

Edison Mission Energy is a unit of U.S.-based Edison International (EIX), a shareholder in the 1,230-MW Paiton I power plant in East Java.

Edgell also confirmed that Indonesia's state-owned electric company Perusahaan Listrik Negara, or PLN, has agreed to a long-term purchasing agreement rate of 4.93 U.S. cents a kilowatt. The rate was agreed upon after a year of negotiations, which also resulted in PLN's commitment to pay Paiton Energy arrears totaling US$450 million, he said.

The US$450 million sum agreed on in renegotiations falls short of a figure close to US$1 billion, Edgell said on the sidelines of the Asia Power Conference in Singapore.

But Paiton and PLN also agreed to extend the long-term power purchasing deal by 10 years to a 40-year agreement, Edgell said.

According to Edgell, PLN had failed to pay for electricity produced and delivered from Paiton-I for six months following the onslaught of the 1997 Asian crisis, which saw the devaluation of the Indonesian rupiah.

The losses borne by Paiton Energy would be mitigated by the implementation of plant expansion plans, Edgell said. The earliest construction date for additional generators is in one year, he added.

In the meantime, PLN would be under obligations to meet the revised commercial terms before Paiton commits to further investment, said an investment banker.

Indonesia recognizes that resolving long-standing power agreement disputes with independent power producers like Paiton Energy would create more favorable conditions to draw foreign investment it badly needs to arrest a looming power shortage.

Aside from Edison Mission, the other shareholders in Paiton Energy are General Electric Capital Corporation, a financing arm of General Electric Co. (GE), Japan's Mitsui & Co. (MITSY) and a local partner, PT BHP.(*)