Dayabumi pays up

Dayabumi Salak Pratama, a 165MW independent geothermal power project on the Indonesian island of Java has made the first amortizing payment of its $150 million senior secured notes - but only just.

Dayabumi Salak Pratama has made its first principal amortizing payment of its outstanding $150 million bond issue, but only by the skin of its teeth. The company is a 50/50 joint venture between Unocal Geothermal of the US and PT Nusamba of Indonesia. The project sells geothermal energy and electricity to Indonesian state energy companies Pertamina and Perusahan Lisktrik Negara (PLN). Under the terms of the power offtake agreement, Dayabumi invoices Pertamina for electricity which is then sold into PLN's transmission grid. Pertamina then invoices PLN for the power. Dayabumi also sells steam to three PLN geothermal power plants.

The payment of the notes was due on 30 June. The day before the deadline, officials at Dayabumi told credit rating agency Standard & Poor's that they would not be making the payment as they had not received any money from Pertamina for the power they had provided. However, at the last minute, Pertamina paid up. This enabled Dayabumi to pay its bondholders the $1.6 million principal payment, as well as a $7.125 million interest payment on time after all.

It is unclear why Pertamina finally decided to pay. Pertamina in many ways is just the middle man. It passes the invoice it receives from Dayabumi straight on to PLN, which is meant to immediately pay Pertamina. In the past, PLN has been very unwilling to honour any of its outstanding power contracts and as such it cannot be assumed that PLN has paid Pertamina for the power.

For bondholders, it was Pertamina's role as an intermediary that probably allowed them to get paid. "I am not sure exactly what happened behind the scenes, but I know that Pertamina paid the invoice to avoid the default," says Barry Andrews, a spokesman for Unocal in Singapore. "As an international energy company they are much more sensitive to these issues than PLN which is only a local electricity company."

Explicit guarantees

Dayabumi is not one of the 27 independent power projects (IPPs) that were created under the 1992 presidential decree and which are all now under water. Rather it is one of two geothermal power projects created under a 1982 presidential decree that allows for explicit government guarantees of geothermal projects.

The offtake agreements between other Indonesia power projects and PLN have not been honoured as PLN believes that they were the result of corrupt and nepotistic practices between the foreign power companies and the then government of Indonesia. Both sides vigorously deny this. The issue has become an international cause celebre with high-ranking government officials from the US and Europe lobbying the new Indonesian governments of BJ Habibie and Abdurrahman Wahid to honour the original contracts.

Since December 1999, Dayabumi has been in default of its bank loans, albeit after the project's syndicated lenders agreed to defer the loans. If they had not done so, the terms of the bond would have instigated a cross-default clause. As it stands, the bonds are rated CC by S&P with a negative outlook.

Dayabumi has to make its next principal payment on 30 September for the same amount. The company is in talks with both Pertamina and PLN renegotiating the original contracts so that the finances can be restructured before that time.

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