Unocal reaches agreement with PLN and Pertamina on Indonesia geothermal contracts
El Segundo, Calif., July 23, 2002 - Unocal Corporation (NYSE: UCL) today said its Unocal Geothermal of Indonesia, Ltd. (UGI), subsidiary and Dayabumi Salak Pratama, Ltd. (DSPL), a 50-percent equity investee of UGI, reached agreement over pricing and production issues at the Gunung Salak geothermal project in Indonesia.
UGI and DSPL reached agreement with PT. PLN (Persero) (PLN), the Indonesia state-owned electricity company, and Pertamina (P.PTM), the Indonesia state-owned oil and natural gas company.
Gunung Salak is a 330-megawatt geothermal steam production and electricity generation project on the western side of the island of Java. UGI operates the steam fields as a contractor to Pertamina and delivers steam to PLN, which operates three electricity-generating plants at Salak. UGI also delivers steam to DSPL for three other generating plants that supply electricity to PLN on behalf of Pertamina.
The new agreement extends the contracts to 2040 and includes a commitment by PLN to accept as much steam and electricity as possible to meet increased demand in the Java-Bali electricity distribution system. In addition, the agreement reaffirms the Government of Indonesia guarantee of PLN's obligations to UGI, DSPL, Pertamina and the project's lenders.
The agreement lowers the selling price of electricity delivered by DSPL and steam supplied to PLN by UGI. It also provides for payment by PLN of a portion of the past due receivable balances to Unocal while Unocal foregoes a portion of the receivables. Allowances for the uncollectable portion of the unpaid receivables have been accrued on Unocal's balance sheet.
With this agreement in place, Unocal's worldwide Geothermal and Power business segment is forecast to have aftertax earnings of $40 to $50 million in 2002, compared with $11 million in 2001.
"This is a win-win solution for all parties," said Brian Marcotte, president of UGI. "The people of Indonesia get cost-effective, environmentally friendly electrical power, and UGI has the opportunity to maximize the sale of steam to power these facilities and receive a return on its long-term investment in the geothermal and power sector. This is an important step toward restoring investor confidence in Indonesia."
PLN, Pertamina, UGI and DSPL will work together to realize the environmental benefits of geothermal power in reducing emissions of greenhouse gases by qualifying further investments in the Gunung Salak project under the "Clean Development Mechanism" (CDM) of the Kyoto Protocol.
Sarulla, Wayang Windu negotiations
Unocal said that it would continue to negotiate with PLN and Pertamina for long-term solutions under the contracts covering the Sarulla geothermal contract area on the island of Sumatra and the Wayang Windu geothermal project on the island of Java. Unocal North Sumatra Geothermal, Ltd., is operator of the Sarulla project, which was suspended in 1998 due to Indonesia's economic crisis.
Unocal Global Ventures, Ltd., holds a 50-percent interest in Magma Nusantara Limited (MNL), which operates a 110-megawatt power plant and related steam field in the Wayang Windu contract area on West Java. Unocal provides operations and maintenance services for the project.
"Unocal looks forward to working out mutually acceptable solutions on the Sarulla and Wayang Windu projects," said Brad Govreau, vice president and general manager of UGI. "Hopefully, these negotiations can be settled quickly so that we can help meet the power needs of the people of Java and Sumatra."
About Unocal Corporation
Unocal is one of the world's leading independent natural gas and crude oil exploration and production companies. The company's oil and gas activities are in North America, Asia, Latin America, and the North Sea. Unocal is one of the world's largest producers of geothermal energy with operations in the Philippines and Indonesia.
This news release contains certain forward-looking statements about Unocal's future operations, earnings and business negotiations. These statements are not guarantees of future performance. The statements are based upon Unocal's current expectations and beliefs and are subject to a number of known and unknown risks and uncertainties that could cause actual results to differ materially from those described in the forward looking statements. Actual results could differ materially as a result of factors discussed in Unocal's 2001 Annual Report on Form 10-K and subsequent reports filed with the Securities and Exchange Commission.
U.S. investors are urged to consider closely the disclosure in Unocal's 2001 Annual Report on Form 10-K (SEC File No. 1-8483). Copies of the company's SEC filings are available from the company by calling 800-252-2233.
Updated: July 2002