Indonesia's PLN Awards Construction Contract to Mitsubishi for 750-Megawatt Combined-Cycle Power Project

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Researched by Industrial Info Resources (Sugar Land, Texas)--State-owned electricity firm PT Perusahaan Listrik Negara Persero (PLN) (Jakarta, Indonesia) recently awarded Mitsubishi Heavy Industries Limited (TYO:7011) (Tokyo, Japan) a contract to set up a 750-megawatt (MW) combined-cycle power plant. The contract involves the construction of a power plant at the site of the existing Tanjung Priok Power Plant, which is located about 10 kilometers northeast of central Jakarta. The new plant is intended to ramp up the existing facility's power generating capacity and is expected to start operating beginning in November 2011. Japan's Official Development Assistance will make arrangements for project financing.

Mitsubishi will supply the new power plant with one steam turbine, two M701F gas turbines, two heat-recovery steam generators and balance of plant. The generators will be supplied by Mitsubishi Electric Corporation (TYO:6503) (Tokyo), which will also handle all the trade particulars. The substations and power transmission facilities will be supplied by Areva T&D, a division of Areva SA (EPA:CEI) (Paris).

As Indonesia's economy grows, the country has been facing a sharp increase in demand for electricity that is being difficult to meet. According to officials, power demand has been increasing by about 10% every year. The gap between the nation's power production and power demand was set to reach 39 billion kilowatt-hours in late 2008. West Java, which is the region around Jakarta, has been facing one of the largest shortages. In order to tackle this power crisis, PLN has been concentrating on setting up new power plants, as well as expanding and repowering existing ones. PLN's current power generating capacity is 25,000 MW and three new coal-fired power plants are set to begin operation in 2009.

Besides setting up new plants, the country is attempting to tide over the crisis by launching planned brownouts and switching from gasoline to natural gas that is locally available in abundance. This strategy has been effectively followed in the islands of Bali and Java, which form the country's business belt, since July 2008 and will be effective until the end of 2009. This plan is an attempt to solve the nation's power problems in the middle-term and to manage better power distribution in the short-term.

However, the plan is adversely affecting Indonesia's industrial sector. The power outages are resulting in irregular production and financial losses for companies. Japan is a major investor in Indonesia with about 900 companies in the country. Almost all of the companies are severely hit by the power crisis and several companies are considering pulling out of the country.

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