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THE ASIA BOOM : Pacific Rim Movers and Shakers : 'The reason people want Mission Energy involved in a power project is our unsurpasseddevelopment capability.' Edward R. Muller, president and chief executive officer of Mission Energy

November 29, 1994|CHARLES P. WALLACE | TIMES STAFF WRITER

JAKARTA, Indonesia — At the remote eastern end of Java, construction work has begun on a massive new power project that will help Indonesia's booming economy keep up with the country's enormous demands for electricity.

Known as Paiton I, the $2.6-billion plant is being built by a consortium of companies led by Mission Energy Co., the Irvine-based sister company of Southern California Edison. What's a nice Orange County company doing half a world away in Java?

"We're bringing outside capital and a tremendous amount of expertise to this project," said Edward R. Muller, president and chief executive officer of Mission Energy.

The 1,350-megawatt project is the largest privately funded and owned power producer in Indonesia.

The project is jointly owned by Mission, General Electric Co., which is supplying the turbines, the Japanese construction firm Mitsui and an Indonesian company that is supplying the coal for the plant. It is scheduled to start producing power in 1998.

Mission came into being during the Carter Administration, when legislation was adopted requiring electric utilities to buy power from private suppliers that met certain efficiency standards. Mission began producing electricity in Bakersfield at a so-called co-generation plant that was producing steam to pump oil out of the ground.

Now, Mission has joined a stampede to foreign countries that are privatizing their electric power industries. As well as its plants in California, Nevada, Florida, Virginia and West Virginia, it is operating in England, Spain and Australia.

Like most infrastructure companies, Mission sees the greatest potential for growth in Asia and has plans for projects in the Philippines, India and China.

"The total installed capacity of Southern California Edison is 20,000 megawatts," Muller noted, "and China is hoping to replicate that every year."

Robert M. Edgell, Mission's executive vice president, said that, while the technology for coal-fired power plants has not changed much in the past 40 years, the Paiton I project will be state of the art, with one-third less emissions than current Environmental Protection Agency standards for power plants in the United States.

Mission modeled the Paiton I power station on a plant that it had built in Florida, taking a lot of the guesswork out of the planning.

Mission's role in the project was basically as the deal-maker. It pulled together the consortium, helped raise the financing and is lending its expertise to the construction and operation of the plant.

"The reason people want Mission Energy involved in a power project is our unsurpassed development capability," Muller said.

But he acknowledged that the market, which emerged just two years ago in Asia, is now crowded with players trying to get in on the private power boom, from Hopewell Holdings in Hong Kong to Enron Corp. of Houston.

He noted, for example, that the company has already started training 500 employees even though the plant will not be ready for four more years.

"It takes a lot of patience," noted Edgell, who has spent 200 days in Jakarta this year putting the finishing touches on the deal. "You can spend several years in the development process and many millions of dollars before reaching an agreement."

As a private producer of electricity, Mission has already secured a power purchase agreement from the state-owned utility in Indonesia, guaranteeing a price and convertibility into U.S. dollars. Similarly, the coal company has guaranteed a supply of energy. But there are still risks involved.

"We must operate the plant efficiently or we don't get paid," Edgell said. On the other hand, returns on power investments in Southeast Asia have been averaging a minimum of 20% a year.

Which is not bad if you are a public utility in the highly regulated California market.

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