Indonesia Opens ‘Fast-Track’ Door To Private Energy Producers

Thursday, 14 January 2010

The Jakarta Globe

A presidential decree signed on Friday has formalized a plan for private-sector power producers to supply power under the second phase of the government’s “fast-track” generating program , a senior Energy Ministry official said on Wednesday.

A copy of the decree was still unavailable, but Jacobus Purwono, the ministry’s director general of electricity and energy utilization, said it would permit state utility company PT Perusahaan Listrik Negara to develop coal, geothermal and hydropower generating plants in cooperation with independent producers.

“The president signed it [the decree] on January 8,” he said.

PLN is already buying electricity from independent power producers to address its production shortfalls.

The first phase of the “fast-track” generating program, aimed at meeting the country’s increasing energy needs, will see an extra 10,000 megawatts of capacity added by 2013, mostly through coal-fired plants. The second phase, which will shift away from coal, is intended to add a second 10,000 MW of capacity by 2013 or 2014.

The presidential decree will strengthen a number of other regulations intended to involve independent producers in the program, Jacobus said. The government plans to subsidize the cost of power purchased by PLN from independent producers, he said.

A number of public-private electricity deals have stalled because of PLN’s unwillingness to meet the producers’ asking prices. Prices differ from one project to another, depending on a variety of factors such as location, capacity and the type of power plant.

In December, the government released a ministerial decree on the benchmarking of the price of geothermal electricity sold to PLN. But Jacobus did not explain whether such a plan had been expanded in last week’s decree or in other regulations 

In the second phase of the fast-track project, PLN will build power plants with capacity totaling 6,415 MW, while another 4,262 MW will be supplied by independent power producers. PLN has said it needs $7.6 billion through 2014 to add 6,415 MW of capacity.

Natal Argawan Pardede, corporate secretary of state-owned infrastructure firm PT Wijaya Karya (Wika), said the biggest obstacles to private sector participation in the fast-track program were financing and the price at which independent producers can sell electricity to PLN.

“I see a strong commitment by the government to stimulate the private sector to join the scheme,” Natal told the Jakarta Globe. “If somehow the government offers a scheme that can give IPPs [independent power producers] better prices, of course their project feasibility improves.”

Wika is working on a $100 million project to build geothermal power plants with a total capacity of 40 MW.

Jacobus said the government is finalizing the necessary regulations and PLN is preparing the required documents so tenders for the second phase of the fast track program can be realized by February.