10 July 2002 – Edison Mission Energy announced Tuesday that Paiton Energy and P. T. PLN, the government-owned electric utility in Indonesia, concluded an amendment to the Power Purchase Agreement (PPA) originally signed in 1994, thereby providing an overall solution to the problems caused by the Asian financial crisis.
The PPA governs the terms under which Paiton Energy sells and PLN purchases the capacity and electric energy of the 1230 MW Paiton I power project located in East Java, Indonesia. The amendment to the PPA implements contractually the commercial agreements reached in a binding term sheet entered into by Paiton Energy and PLN in December 2001. Paiton Energy is an Indonesian power generation company which is 40 per cent owned by Edison Mission Energy. The other owners of Paiton Energy include Mitsui & Co. and GE Capital.
The amendment modifies certain commercial terms of the original 1994 power purchase agreement. Principal changes include a reduction in the prices to be paid under the agreement and an extension of its term. Conditions remain to be satisfied before the amendment agreement will become finally effective, including approval of the lenders to Paiton Energy. The parties have 180 days to satisfy these conditions. In the meantime, the parties intend to continue, as they have done since January, to operate in accordance with the terms of the binding term sheet as it has been implemented by the amendment agreement.
Paiton Energy and its shareholders, including Edison Mission Energy, are actively engaged with the project’s lenders to obtain their approval of the amendment and of a restructuring of the project’s debt that will be more closely aligned with the modified commercial terms.
Energy consumption in Indonesia continues to grow rapidly as the Indonesian economy recovers from the effects of the Asian financial crisis, which began in 1997. The Paiton I project is currently operating at or near its maximum contract capacity. Edison Mission Energy noted the encouraging announcement recently made by President Megawati Sukarnoputri of her government’s plans for a new era of support of foreign direct investment in Indonesia.