PLN short $2.78b to build 35 plants

Ika Krismantari, The Jakarta Post, Jakarta

State electricity company PLN revealed Thursday it was facing difficulties in financing a 10,000-megawatt (MW) coal-fired power plant project after Chinese lenders showed reluctance.

According to copies of documents obtained by The Jakarta Post, PLN is US$2.78 billion short of the $4.8 billion it needs to finance the project which involves 35 plants.

So far, PLN has launched four tenders for 13 plants, all won by Chinese contractors.

However, no more than three plants have secured all the financing required.

Commitments so far include $464 million in rupiah-denominated loans from a consortium of local banks and $853 million in dollar-denominated loans from Barclays in the UK and the Bank of China.

The three coal-fired plants are the 600-MW Labuan plant in Banten, 900-MW Indramayu plant in West Java and 600-MW Rembang plant in Central Java.

The agreements governing the project make PLN responsible for only 15 percent of total financing needed, while contractors must bear the remaining 85 percent by finding third parties to provide the loans.

All of the tender winners expect their financing to come from Chinese lenders, particularly the Bank of China.

However, demands from Chinese lender that the Indonesian government fully guarantee the project stalled negotiations.

Even after the government agreed to the guarantee, the negotiations have drifted without a clear deadline as both government and lenders differ on interest rates.

In turn, the government demands PLN invite bids from alternative lenders so as to meet the target of completing the project by year-end 2009.

"We have to hold tenders to find other banks, as the target of having Chinese lenders as the sole lender to support all of the projects can not be fully fulfilled," said head of the government's power-sector development program, Yogo Pratomo, during a hearing with the members of the House of Representatives Commission VII.

Yogo said the government aimed to have all funding lined up by the end of first semester 2008.

On the basis of project's progress so far, Yogo estimated that no more than six power plants -- a total capacity of 1,950 MW -- would be able to meet the initial target of starting operations in 2009.

As part of the 10,000-MW program, the government wants to have 10 new coal-fired plants with a total capacity of 6,900 MW, in Java, and 25 more with a total capacity of 3,100 MW outside Java, by 2009.

The aim of the program is to reduce dependency on the oil-based fuels currently burned by some 70 percent of PLN power plants.

PLN president director Eddie Widiono said that PLN fuel consumption in 2008 was expected to increase to 10.6 million kiloliters this year, up from last year's 10.2 million, to meet the 2008 national electricity growth target of 5 percent.