PLN set to sign five more power deals next month

Urip Hudiono, The Jakarta Post, Jakarta

State-owned electricity firm PT PLN will sign contracts next month for the construction of five coal-fired power plants that will have a total output capacity of about 3,600 megawatts (MW).

"All of the plants are located in Java," Yogo Pratomo, who heads the government's power-sector development program, told reporters Friday after a meeting with Vice President Jusuf Kalla, PLN president Eddie Widiono, and a number of economics ministers to discuss the program's progress.

He said that the five power projects were part of the government's fast-track program to boost electricity supply by about 1,000 MW within three years up until the end of 2009.

"We also expect to sign the contracts for 25 other power plants outside of Java, starting June."

The five projects for which contracts will be signed in April consist of 900-MW power plants at Teluk Naga in Banten and Pelabuhan Ratu in West Java, and 600-MW plants at Jepara in Central Java, and Pacitan and Awar-Awar, both in East Java.

Yogo did not elaborate on the names of the investors for the five new power plants.

Earlier this March, PLN signed contracts for four coal-fired power plants, all in Java, with a total capacity of 3,300 MW.

The four projects are the 600-MW new Suralaya plant in Banten, to be constructed by the China National Technical Import & Export Corp. (CNTIC), the 600-MW Labuan plant in Banten, to be constructed by Chenda Engineering Corporation and its partner, PT Truba Jurong Engineering, the 900-MW Indramayu plant in West Java, to be constructed by a consortium consisting of China National Machinery Industry Corporation (Sinomach), China National Electronics Equipment Company (CNEEC) and PT Penta Adi Samudera, the 600-MW Rembang plant in Central Java, to be constructed by Zelan Malaysia, and the 600-MW new Paiton plant in East Java, to be constructed by China's Harbin Power.

The government launched a "fast-track program" last year to provide additional supply to the nation's power grid of some 10,000 MW by 2009 against a backdrop of growing demand for electricity.

The program will cost some $8 billion for power generation alone, Eddie said, and will amount to Rp 160 trillion (some US$17 billion) if the costs of power transmission and distribution are included.

Eddie said that the program would result in full power coverage for the country, and add another 30 million PLN customers over the next 15 years. Currently, the country's electrification rate stands at 56 percent, and PLN has 35 million customers.

The program has from the outset been the subject of controversy, with the government initially preferring the direct appointment mechanism before acceding to public criticism and eventually holding open tenders.

This was followed by a lack of interest from investors, with several projects having to be re-tendered. Most potential investors complained about project financing issues and the low power-purchase prices offered by PLN.

The signing of the contracts came after a two-month delay due to the fact that the developers failed to submit their performance bonds on time.

Yogo said the government would pursue its discussions with potential investors about government power-purchase guarantees, and would continue to uphold PLN's public service obligation.

Yogo also said that local bank financing would be prioritized for all power plants with outputs of 65 MW or less.

Meanwhile, for those with capacities of 100 MW and above, 85 percent would be financed through export credits and 15 percent through the Rp 2.2 trillion in bonds that PLN issued last year.