PLN agrees to Paiton plants' power purchase rates

Indonesian national power company Perusahaan Listrik Negara has reached preliminary agreements for long-term rates for power from the Paiton-I and Paiton-II plants, Dow Jones Newswires quoted PLN?s official as saying on Thursday.

Parno Isworo, PLN's finance director, said the company had agreed to pay power producers PT Jawa Power and PT Paiton Energy (P.PAI) 4.8-4.9 cents a kilowatt-hour for power from the plants. Final settlement of the rates is expected in three to four months.

Parno said prior to concluding the 30-year power purchase deal, PLN paid lower rates stipulated on interim deals with the independent power producers.

PLN has been negotiating for lower prices from the IPPS because the devaluation of the rupiah in 1997 has limited PLN's ability to meet the original power-purchase agreements which were in U.S. dollars.

"We have to work out the details, which may involve some adjustments," Parno was quoted as saying. But he did not elaborate the specifics.

The Paiton-I and Paiton-II plants have a combined generating capacity of 2,450 megawatts.

The agreements also oblige PLN to pay arrears totaling more than US$800 million to Jawa Power and Paiton Energy, according to figures quoted by the local press. Even with lower rates agreed in interim deals, PLN hadn't been able to pay in full what it had agreed to pay the IPPs.

While rates have been agreed, and are unlikely to be adjusted down further in the final settlements, they fall short of the IPPs' earlier demands of 5 U.S. cents/kWh and above, officials involved in the negotiations said.

But Paiton Energy and PLN agreed to a 4.93-cent/kWh rate, which is sufficient for the IPP to repay its debt, Dow Jones Newswires quoted a source familiar with the content of the agreement as saying.

In the case of Jawa Power, the latter had been trying to obtain 5 cents/kWh in order to facilitate a principal loan repayment that commences in January.

But it appears to be settling for a lower 4.65-4.8 cents/kWh rate, according to sources, although PLN President Director Eddie Widiono was quoted by the local media as saying that the rate had been agreed at 4.8 cents/kWh.

Both Jawa Power and Paiton Energy will raise their guaranteed generating capacity in the latest agreements signed with PLN, so that the lower rates can be offset by an increase in power dispatched, sources said.

PLN has acknowledged in the past the urgency to conclude long-term power rates with Paiton Energy and Jawa Power. Parno told Dow Jones Newswires earlier this year that "a resolution with Paiton-I and Paiton-II will serve as a showcase to investors that we can provide a conducive environment for new power projects."

Paiton Energy's shareholders are Edison Mission Energy, a unit of Edison International (EIX), General Electric Capital Corp., the financing arm of General Electric Co. (GE), Japan's Mitsui & Co. (MITSY) and a local partner, PT BHP.

Meanwhile, Jawa Power is 50% owned by Germany's Siemens Power, 35% by the U.K.'s PowerGen PLC (U.PWN), and 15% by local company PT Bumipertiwi Tatapradipta. (*)