Indonesia will honour IPP contracts

Indonesian President Abdurrahman Wahid is dropping legal action against independent power producers (IPPs) in a bid to resolve the long-running dispute between state power firm PLN and project developers. Wahid is attempting to create a new economic climate for the country, announcing new economic measures and a pledge to put PLN on a stronger commercial footing.

Wahid has said that PLN will honour all the contracts made between independent power producers and former President Suharto’s government. It is hoped that the plans will improve Indonesia’s investment climate which has been hurt by the on-going IPP dispute.

The move resulted in the resignation of PLN president, Adhi Satriya. He will be replaced by former mines and energy minister Kuntoro Mangkusubroto who will be responsible for increasing PLN’s efficiency. A recent audit of PLN by Arthur Andersen found that the national utility has lost rupiah5.26 trillion ($725m) annually through inefficient operation.

PLN signed 27 contracts to purchase power from IPPs during Suharto’s presidency. After the fall in value of the rupiah in 1997, PLN attempted to renegotiate the contracts. The country’s previous president, B. J. Habibie, initiated law suits against Paiton Energy and other developers. Habibie and PLN alleged that the contracts had been entered into corruptly.

Korea seals deal for nuclear plants

A long-delayed deal to construct two nuclear reactors in North Korea was signed in Seoul in December as part of multinational efforts to curb the communist state’s nuclear weapons threat. A contract was signed between the Korean Peninsula Energy Development Organization (KEDO) and South Korea’s Kepco that paves the way for two US-designed light water reactors to be built.

The $4.6bn deal comes more than five years after an agreement was struck between Washington and Pyongyang for the construction of the plants in exchange for the abandonment by North Korea of its nuclear development programme. KEDO, a consortium of US, Japanese and European companies, and Kepco, will supply and build two 1000 MW reactors at Kumho on the northeastern coast of North Korea.

The project will be financed largely by South Korea and Japan. The reactors will replace North Korea’s Soviet-designed graphite-moderated reactors. The first reactor could be completed by 2007, and the second a year later. Under the initial agreement, the USA promised to complete the reactors by 2003.

Cogentrix and CLP deal blow to fast track investment image

The Karnataka state government is to ask CLP Power International and Cogentrix to reconsider their decision to pull out of the 1000 MW Mangalore project, one of India’s flagship ‘fast track’ power projects. CLP and Cogentrix announced in December that they would halt development of the $1.3bn project, citing unacceptable delays.

The decision by Cogentrix and CLP is a blow to India’s fragile investment image. India’s power minister responded to the news by saying that he wants to give priority treatment to the two developers. The two sides are to hold talks.

India invited Cogentrix to invest in the project in 1992. It is one of eight ‘fast track’ power projects in the country, but has been beset by political and legal disputes.

“Even the most patient developer must realise that a time comes when resources are better directed toward efforts that have a higher likelihood of success,” said David Lewis, chairman and CEO of Cogentrix.

Ballard aims for Japanese market

Canada’s Ballard Power Systems has entered an agreement with Tokyo Gas Co. and Ebara Corp. to develop fuel cell systems aimed at the Japanese residential electricity market. The deal followed an announcement by Japan’s ministry of international trade and industry (MITI) that it plans to expand the use of fuel cells as a partial substitute for nuclear power.

Ballard’s agreement is specifically for the development of a fuel processor system for a 1 kW fuel cell power generator. It is currently developing a power system for residential markets, and expects to see complete commercial products in 2003.

AGL buys ETSA

AGL, Australia’s largest energy retailing company, has acquired the ETSA Power retail electricity business in South Australia for $175m, adding 734 000 electricity consumers to its customer base. It signed a deal for the purchase with Cheung Kong Infrastructure Holdings and Hongkong Electric Holdings, which acquired ETSA in a sell-off by the South Australian government in late 1999.

The acquisition brings AGL’s customer base in Australia to 1.9m and will lift its power sales to just under 15 000 GWh. It says that it will bring new customer service initiatives to South Australia.

News digest

Australia: Tasmania is to be the site of Australia’s largest wind farm, a 10.5 MW facility that will be operational by 2001, according to developer Hydro-Electric Corp. The project is the start of a A$25m ($15.8m) investment in wind power development by Hydro-Electric over the next two years. Further development on Tasmania is dependent on the construction of the Basslink power cable.

China: The first generating unit of the Xiaolangdi water control project has started operation on the Yellow river. Construction on the $5bn project began in 1994. It is expected to be completed in 2001 when the remaining five units will be operational. The project was supported by the World Bank.

Japan: Japan’s largest leasing company, Orix Corp., and Enron of the USA are to team up to generate and sell electricity in Japan. The two companies have formed a joint venture that will buy and operate power generating facilities and sell output to commercial and industrial customers.

Korea: Singapore Power International has acquired a 100 per cent stake in Samsung General Chemicals’ cogeneration facilities in Seosan, South Korea for $160m. The deal is in line with Singapore’s drive to develop a portfolio of power assets in the region. It recently acquired generating capacity in mainland China and Taiwan.

Pakistan: The Water and power Development Authority (Wapda) has signed a memorandum of understanding with private power developer Northern Electric Co. to reduce the tariff that Wapda pays for power generated from a plant in Punjab. A levelised tariff of ¢2.665 plus Rs0.385/kWh has been agreed, a reduction on the original tariff of ¢5.912/kWh. Wapda will save $11.65m over ten years.

Philippines: State-owned PNOC Exploration Corp. has agreed to buy a ten per cent stake in the Malampaya natural gas project from Shell Exploration Philippines. The deal is thought to be worth $200m. Shell now holds a 45 per cent stake in the project and Texaco Corp. also 45 per cent. The gas field holds an estimated 96bn m3 of natural gas, enough to supply 3000 MW of generating capacity for 20 years.

Thailand: Following improvements in its economy in recent months, Thailand’s government is moving closer to selling stakes in state energy companies and other key sectors. State enterprises will complete privatization plans this year. Selling state owned assets is a key condition of the $17.2bn aid package put together by the International Monetary Fund to help the Thai economy after the Asian financial crisis.