RI to pay US$15m for US firm power claims
Friday, February 2 2001 - 03:30 AM WIB
Indonesia must pay the Multilateral Investment Guarantee Agency (MIGA) US$15 million due to the cancellation of a power project involving US-based Enron Corp., an official said here yesterday.
"Indonesia, whether it likes it or not, must pay?even if we want to hire international lawyers, it's way too late," CEO of state utility company PT Perusahaan Listrik Negara (PLN), Kuntoro Mangkusubroto, told the press.
MIGA told Jakarta to pay the amount after it had paid Enron due to the cancellation of an electricity project in Pasuruan, East Java. Enron is a member of the East Java Power consortium that handles the project.
MIGA, the insurance arm of the World Bank, has guaranteed the power project.
MIGA's claim fell due in September 2000.
Asked for details of when the payment fell due, Kuntoro declined to answer. He said: "One thing's for sure, the payment scheme was agreed to. I forget when payments were due to begin, although (I do know) we were to pay by installments."
The Pasuruan project was one of the electricity projects cancelled under Presidential Decree No. 5/1998.
"Although the project was not even started, the contract is still legally binding. Such a cancellation does carry risks," Kuntoro said.
Indonesia has been burdened by similar claims lodged by other US companies taking part in several power projects throughout the country.
The PLN has tried to take legal steps in its bid to cancel many projects that were approved by the corrupt New Order government.
Under the project agreement, PLN pays private power producers a much higher price than that of its selling price.
Worse still, it pays in US dollars and receives payment in rupiah.
Following the country's currency crisis, which saw the rupiah lose 80% of its value against the greenback, PLN is now technically bankrupt due to its mounting debts.
Enron originally agreed not to file for payment of the claims provided it could take part in an oil piping project in Jambi with the state oil giant Pertamina.
"Winner of the piping bid actually Okayed Enron's participation in the project. However, since Pertamina rejected it, Enron failed to participate in it," said Kuntoro, who is also a former Mines and Energy Minister.
Enron has now closed its representative office and left Indonesia.
"The company threatened it will not invest in Indonesia anymore," Kuntoro said.
In another development, Antara quoted a lawmaker as slamming the planned claim payment.
"Indonesia is not supposed to pay Enron's claim through MIGA, considering the company has not invested anything at all in the development of the Pasuruan project," said Emir Moeis, vice chairman of House Commission VIII.
When the project was cancelled, Moeis went on to say, Enron only had a principal license.
"There was no development activity whatsoever in the field - they didn't even have a piece of land there," said the legislator. (*)