Indonesia Power to require additional 14m tons of coal by 2010

Ika Krismantari, The Jakarta Post, Jakarta

Indonesia Power (IP), a subsidiary of state-owned electricity utility PLN, said Monday it would need an additional 14 million tons per year of low-rank coal by 2010 in order to fire its new coal power plants in Java.

The new plants will have a combined capacity of 3,900 megawatts (MW).

As part of the government's crash program to secure additional power supply of 10,000 MW from PLN by the end of 2010, PLN has given a mandate to IP to develop new power plants in Suralaya, Banten (with a total capacity of 600 MW), Labuan, East Java (600 MW), Teluk Naga, West Java (900 MW), northern West Java (900 MW) and southern West Java (900 MW).

Indonesia Power's development and commercial director Bambang Isti Eddy said Monday on the sidelines of a coal-industry seminar in Jakarta that these power plants had been designed to use low-rank coal with calorific levels of less than 5,000 per gram burned and a moisture content of up to 30 percent.

Currently, the company requires 11 million tons of high and low-rank coal per year to fire its existing power plants at Suralaya -- the largest coal-fired power plants in Java with a total capacity of 3,400 MW.

The company sources five to six million of high-rank coal per year from the country's second biggest coal producer, PT Bukit Asam Batubara, while its low-rank coal requirements are supplied by other local companies, including Adaro, Kideko and Berau Coal.

Bambang said that he hoped that the local coal industry would be able to meet rapidly increasing coal requirements, which are expected to rise by 70 million tons when the new power plants being built under the fast-track program come onstream.

"By 2010, IP alone will need a total additional supply of 25 million tons per year, of which only nine to ten million will be high-rank coal, with the rest being low-rank coal," Bambang said.

Of Indonesia's total of 6.7 billion tons in coal reserves, 70 percent consist of low-rank coal.

The government has encouraged the construction of coal-fired power plants that use low-energy coal, which is cheaper than other grades, to meet growing electricity demand and reduce the use of expensive oil-based fuels.

Under the government plan, PLN and private power producers are expected to increase coal-fired capacity by 20,000 MW by 2010.

To encourage increased production of low-rank coal, the government is considering providing incentives to mining firms producing low-rank coal with calorific levels of below 4,200 per gram.

The planned incentives will likely take the form of cuts in royalty and other payments, such as reducing mandatory payments to the coal development fund to 7.5 percent of total sales from 13.5 percent at present.

Incentives could also be provided to producers of low-rank coal with calorific levels of between 4,600 and 5,100 per gram so that the mining firms would only have to pay 9 percent of their total revenues to the state.

Indriatmoko, the head of minerals and coal planning at the Energy and Mineral Resources Ministry, who also attended the seminar, said the regulations on incentives had been proposed to the Finance Ministry for approval.