State and Private Sector Package Funding to Meet Indonesia's On/Off/On Power Crisis

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Researched by Industrialinfo.com (Industrial Information Resources Incorporated; Houston, Texas) Estimates indicate that Indonesia will need to more than double power generation capacity over the next ten years and add 24,000 MW to satisfy demand. Currently the country's total generating capacity stands at around 20,000 MW with consumption averaging up to 18,000 MW. Some 66% of the investment to finance the building of new capacity will have to come from the private sector.

There are an increasing number of power projects in construction or the engineering and planning stages, and project finance is being sought. In the late 1990's, many proposed projects foundered before reaching final approval through lack of finance. Some estimates put the amount of new capacity scrapped or stalled in those years as high as 15,000 MW.

Earlier this year, the Japanese government provided $980 million in soft loans to Indonesia to go toward improving the country's basic infrastructure, and thus improve its investment climate.

Power projects receiving finance from this loan include the Semarang power plant rehabilitation project ($81 million). The plant is converting its oil-fired system to a cleaner and more efficient gas-fired system. The Lahandong environmentally-friendly geothermal plant in North Sulawesi ($55 million) will use Japanese technology. Both these projects bear an interest rate of 0.75%, with repayment over 40 years. The Tanjung Priok power plant expansion project is receiving $540 million at 1.3% interest repayable over 30 years with a ten-year grace period. Indonesia's state electricity company PT PLN will be supervising this project.

A new hydroelectric power plant, PLTA Musi Ujan, being constructed by PLN in Bengkulu, is scheduled to be commissioned in 2005. Work began on the 210 MW plant five years ago. The Sumatra interconnection should be ready when the plant comes online, which will allow Musi Ujan power to help Sumatra cope with power shortages.

A consortium of Mitsubishi Heavy Industries (MHI) (TOKYO:7011), Mitsubishi Electric (TKX:6503) and a local partner were awarded an engineering, procurement, and construction (EPC) full turnkey contract from PLN for a 740 MW gas turbine combined-cycle (GTCC) power plant to be constructed at Cilegon, in the heart of Indonesia's heavy industry region 90 kilometers west of Jakarta. MHI will supply two M701F gas turbines, a steam turbine and two heat recovery steam generators (HRSG) and other peripheral equipment, and electric generators. It is hoped that the plant, utilizing available natural gas, will avert a power shortage in the area, which has been predicted for 2005. A local company will handle the civil engineering works, installation of equipment, and associated transmission lines. Funding is coming from the Japan Bank for International Cooperation, Nippon Export and Investment Insurance, and with the Indonesian government.

Paiton Energy (PE), a local independent power producer, is planning an 800 MW plant to supply PLN. PE will comply with a government directive in constructing an additional $580 million unit at its complex in Purboliggo, East Java. Paiton is jointly owned by affiliates of Edison Mission Energy, Mitsui, GE Capital, and Batu Hitam Perkasa.

Banks from China, Japan, and the EU have pledged financial support for a 200 MW coal-fired plant in Banjarsari in South Sumatra. The state-owned coal mining company, Tammbang Batubara Bukit Asam would lead a consortium to build the $88 million project. The BUP consortium, which includes state owned Indonesia Power, Redo Tami Abaci, and the Wathena Power Group, has a number of other coal-fired power plant projects, which it plans to build.

Amoseas Indonesia Incorporated, a subsidiary of ChevronTexaco (NYSE:CVX) (San Ramon, California), along with PLN and the country's oil company, Pertamina, is developing the 110 MW Darajat III geothermal power plant in West Java. The $100 million plant is an extension of the Darajat I and II projects, which produce 145 MW of clean electricity. The plant should be in operation and selling its output to PLN in mid-2006. Amoseas Indonesia is championing the cause for more clean-energy geothermal plants to assist the country in economizing on natural gas and oil feedstock. Geothermal generation is said to produce 90% less CO2 than coal-fired generation.

Another 700 MW of geothermal power is now in the planning or construction phase with the total capacity due to come online between 2006 and 2008. The largest project will be the 330 MW plant at Lumut Balai in South Sumatra, to be built by a consortium involving Pertamina, Philippine National Oil Company (PNOC), and the Marubeni Corporation (Japan). The consortium has undertaken a feasibility study on its $750 million geothermal power project, which includes two other plants with a total capacity of 170 MW.

There are a number of other projects, which have been delayed. The on-off-on syndrome including a 1,320 MW plant project is now expected to start up in 2006, as well as a Siemens led 6 x 150 MW power stations package, which was stalled by the on-off-on switch over a period of years.

The projects above demonstrate the mix of private and government funding and the direct involvement of government and state owned utilities in projects in the effort to meet the power shortage challenge in Indonesia.

PLN is also pursuing regional power supply cooperation having agreed to study the development of an electrical interconnection between Indonesia and Malaya. The feasibility studies conducted by PLN and its Malaysian counterpart TNB should be completed in the last quarter of this year. This study follows the signing of a Memorandum of Understanding to build a submarine cable between the Malaysian Peninsula and Sumatra. The interconnection is part of the Asean Power Grid that will see eleven interconnections between the ten member countries in the Association of South East Asia Nations (ASEAN).

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