Indonesia Books Tight Delivery 17 Power Station $7 Billion Deal with Chinese

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Researched by Industrial Info (Sugar Land Texas). Indonesia’s minister of Energy and Mineral Resources Purnomo Yusgiantoro has said that the country will need over 30,000 MW of new generation capacity over the next ten years to keep up with the average 9% per annum growth in power demand. The island of Java alone would require 21,000 MW of this additional power.

From a current generating capacity of about 25,000 MW, Java and Bali use 80% of the power generation capacity. The lack of viable, financed power projects in the pipeline has cast some doubt on the government’s ability to provide the necessary framework to meet the ambitious growth goals. With a history of corruption and collusion between officials and contractors, the government’s plan to fast-track the construction of several coal-fired plants by appointing contractors directly, instead of picking them through a lengthy official process, ran into controversy and obstruction. The government then said that a total of $8 billion projects would be offered through open bidding, but doubts and opposition to the process lingered on.

The government then proposed a crash program for the construction of coal-fired plants with a total capacity of 10,000 MW to be commissioned by 2009, with a local consortium handling plants with a capacity under 135 MW and international companies handling the larger projects.

It so happened that the president of Bukaka Teknik Utama (Jakarta, Indonesia), one of the directly appointed local consortium companies, was the brother of the country’s vice president and other consortium companies had political connections. A truncated version of open bidding for the smaller projects was then proposed by the Bukaka president himself.

At the end of April, cutting through this super critical local bidding process, Yusgiantoro announced that Chinese companies have agreed to a highly pressured schedule to complete eleven 300 MW power plants within 30 months and six 600 MW plants within 36 months of construction commencing. Delivery date for all completed contracts is 2010, which indicates that all 6,900 MW of projects must be under construction in 2007 or early 2008.

Harbin Power, Shanghai Electricity Corp, Dongfang Electricity Corp and China National Technology Import Export Corp have signed an MoU (memorandum of understanding) with the state owned electricity company, Perushan Listrik Negara, for the projects and for equipment to cover a total of 10,000 MW to be generated from coal-fired stations. The full contract is due to be signed in August. Under the agreement the Chinese will provide equipment and funding through export credits from China Exim Bank and the Bank of China. Alternative funding could come from the sale of bonds by PLN loans from Islamic banks.

It is estimated that the construction of the 17 coal-fired power plants will take an investment of $5.6 billion and the balance of equipment for the smaller stations will take $1.4 billion making the total contract worth $7 billion. It was reported that the four Chinese companies offered a construction cost of $800 to $850 per kilowatt, which compared favorably to the $1,000 to $1,700 from U.S., German and Japanese bidding companies. The speed of completion of the projects offered was the other component in the winning bid.

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