Japan (IBJ) as financial advisers in February 1992. In August 1992, after several clarifica-
tion sessions with each bidding group, the Government of Indonesia awarded the sponsors
the exclusive right to conduct further negotiations on the project. From the end of 1992
until March 1994 the sponsors negotiated the power purchase agreement with the
Government of Indonesia.
The sponsors retained RW Beck as their technical advisers. PLN retained Lahmeyer of
Germany as technical and financial advisers, as well as SBC Warburg, Lazard Frères and
Lehman Brothers as financial advisers.
Principal project contracts
The principal project contracts are the PPA, the construction contract, the operation and main-
tenance (O&M) agreement, the fuel supply agreement, the coal purchase agreement, the min-
ing and barging contract, the coal terminal services agreement, the contract of affreightment,
and the Kelanis Facility agreement.
The PPA defines the rights and obligations of Paiton Energy and PLN relating to devel-
opment, financing, construction, testing and commissioning of the project, and operation and
maintenance of the plant; the making of capacity and energy payments, risk allocation in the
event of force majeureand changes in the regulatory environment; events of default; rights of
termination and consequences thereof; insurance, liability and indemnity obligations; and dis-
pute resolution.
The construction contract provides for the contractor, a consortium of Mitsui, Toyo and
Duke/Fluor Daniel, to provide design, engineering, procurement, construction, startup, test-
ing and commissioning services, and the equipment and materials necessary for construction
of the plant on a fixed-price, turnkey basis. If the plant is not in compliance with defined
emissions limits, the contractor pays US$750,000 per MW for each MW by which the net
electrical output has to be reduced in order to comply with emissions limits. If each unit does
not achieve a minimum electrical output of 615 MW, the contractor pays US$5 million per
MW for each MW by which the net electrical output falls below 615 MW.
The O&M agreement defines the terms under which Edison Mission Energy’s
Indonesian affiliate provides operations, maintenance and repair services necessary for the
production and delivery of electricity.
The fuel supply agreement provides that BHP is to be the exclusive supplier of coal to
the project and defines BHP’s obligations under the coal supply plan.
The coal purchase agreement defines the obligations of PT Adaro Indonesia, owners of
the Adaro mine in the southern part of the island of Kalimantan (also known as Borneo),
across the Java Sea from the Paiton complex, to sell to BHP all of the coal that BHP is oblig-
ed to deliver under the fuel supply agreement.
The mining contract between Adaro and PT Pamapersada defines PT Pamapersada’s
obligations to mine coal, transport it to the Kelanis terminal, strip overburden and provide
routine maintenance services on the roads between the mine and the terminal.
The barging contract between Adaro and PT Rig Tenders Indonesia describes the latter’s
agreement to transport coal from Kelanis to the terminal.
The coal terminal services agreement is PT Indonesia Bulk Terminal’s agreement with
BHP to store coal in a terminal, blend coal located at the terminal, unload coal from barges
and load coal onto vessels.
POWER PLANT