PLN ready to annul electricity switchgear contracts
Thursday, October 26 2000 - 02:00 AM WIB
State electricity company PT Perusahaan Listrik Negara (PLN) said on Tuesday it was ready to cancel the controversial contracts for the development of power switchgear stations in Tasikmalaya, West Java and Kediri, East Java and retender the projects.
PLN's president Kuntoro Mangkusubroto said it was still possible for the state company to cancel the projects because it had not yet made any payment in relation to the contracts and the contractors had not yet carried out any physical activities.
Thus, the cancellation of the contracts would not inflict losses to any parties, Kuntoro told a press conference.
PLN has been pressurized by many members of the public and legislators to cancel the contracts following allegations that the contracts had marked up the value of the projects to almost three times the real price.
Under the contracts, the Tasikmalaya switchgear station was valued at US$386 million, while the Kediri switchgear station at $430 million.
In comparison, the switchgear station in Depok, West Java, which will be built by the consortium comprising French firm Alstom, Japanese firm Mitsibishi and local company PT Multifab, is valued at $136 million.
The contract for the construction of the Tasikmalaya switchgear station was won by the consortium of PT Ritra Safitri and PT Citracontrac in 1998 and the contract for the construction of the Kediri switchgear station by the consortium of PT PP and PT Indokomas in the same year. No data is available on the owners of the companies, which won the contracts for the construction of both switchgear stations.
The projects had been put on hold for several years until the government recently gave a go-ahead to the projects at the request of PLN.
On August 25, 2000, director general of budget at the ministry of finance Anshari Ritonga signed an agreement allowing German bank Kreditanstalt fuer Wiederaufbau in Frankfurt am Main to provide $34.9 million in export credit facility for the construction of the Kediri switchgear station.
On August 30, 2000, Minister of Finance Prijadi Praptosuhardjo signed a loan agreement allowing BNP Paribas Credit Agricole Indosuez to provide $41.1 million in export credit facility for the construction of the Kediri switchgear station.
Both Ritonga and Prijadi had been under fire for signing the loan agreement with several legislators accusing them of being involved in marking up the value of the projects.
Kuntoro said PLN had urged the government to sign the loan agreements because both projects were urgent.
He said the swithgear stations were necessary for the transmission of power supplies from the Paiton I power station in East Java to consumers across Java.
If the construction of the switchgear stations were not completed by 2002, PLN would lose the opportunity of distributing Rp 438 billion ($1=Rp 8,860) worth of power supplies from Paiton per year, Kuntoro said.
Some areas in Java may face shortages of power supply that year, if the power from Paiton could not be distributed, Kuntoro said.
"If the contracts for the construction (of both switchgear stations) and the loan agreements (for the construction of both stations) are cancelled, it is necessary to find another source of financing with more favorable terms and to allow PLN to hold an open international bidding (for the projects)," he said. (godang)