Bosowa Power Plant Project Postponed As China Development Bank Pulls Out

The Jakarta Globe, Janeman Latul, January 30, 2009

PT Bosowa Corp., the largest diversified business group in eastern Indonesia, said on Friday that it has postponed a $200 million, 250-megawatt coal-fired power plant project in South Sulawesi Province because China Development Bank was “having problems” with financing the project. 

“The current global liquidity crisis has affected the venture,” said Erwin Aksa, Bosowa’s chief executive. 

“We are struggling to find investors to finance it after the China Development Bank postponed its investment.” 

Late last year, Bosowa told the Jakarta Globe that the project — part of the government’s “fast-track” generating capacity expansion program — was going ahead, and that its main financier, the China Development Bank, was committed to it. The power plant, if constructed, will be the biggest in eastern Indonesia. 

The delay is likely to cause problems for state power utility PLN, which is targeting 10,000 MW of new generating capacity as part of the first stage of the fast-track program, which is scheduled for completion by the end of this year. All of the planned new plants are coal fired. 

Erwin said the project had to date only secured about $50 million in financing from PT Bank Rakyat Indonesia Tbk, with between $140 million and $150 million still needed. 

The plant, located in Jeneponto district, South Sulawesi, is likely to be delayed until 2011 or 2012, Erwin said. 

“Our investor postponed the project as it is struggling for liquidity and PLN is paying a very low price for the electricity, which convinced them that the project would not be viable,” Erwin said, adding that local and international commercial banks were charging high interest rates, which made it difficult for Bosowa to find other investors. 

“We’re currently looking for new investors, both local and international, although we’re still negotiating with the Chinese bank to see if we can change their minds,” Erwin said. 

Bosowa is has interests in the construction, finance and automotive sectors. The group, based in Makassar, South Sulawesi, is owned by tycoon and politician Aksa Mahmud, the brother-in-law of Vice President Jusuf Kalla. 

Erwin said he also doubted that financing for a number of other independent power projects would be finalized this year. Forty-three independent producers are currently contracted to build plants with a capacity of about 5,700 MW. A total of 44 plants are involved. 

The government plans to soon increase the tariffs paid to IPPs for the electricity they produce by up to 63 percent to encourage more investment in the sector.