Indonesia racing to beat power deficit as new project delays loom

Fri Apr 25, 2014 5:30am EDT

Related Topics

* PLN expects 1,800 MW deficit as demand outpaces supply

* Legal issues threaten to further delay Batang project

* Gas projects may help meet 7 pct-plus annual demand growth

By Wilda Asmarini and Fergus Jensen

JAKARTA, April 25 (Reuters) - Indonesia is racing to speed up construction of gas-fired power projects in Java to prevent a supply crisis if delays continue at the Batang and Cirebon coal-fired power projects, government officials said.

Power demand is growing at more than 7 percent a year in Indonesia, which plans to add 60 gigawatts of power capacity to its existing grid by 2022 to meet the burgeoning needs of its increasingly affluent economy.

But bureaucratic hurdles, a lack of investment and land disputes have held up power projects in Southeast Asia's biggest economy including the public-private partnership in Batang, Central Java, the first of its kind in Indonesia and the biggest new generation coal-fired power station in the region.

With 29 hectares of land yet to be acquired for the 2,000 megawatts (MW) Batang project, there remain uncertainties surrounding when its construction will begin. It was initially due to reach financial closing in 2012, but this has already been rescheduled twice.

"We need to find supply sources quickly," Murtaqi Syamsuddin, planning director at Indonesia's state-owned power utility PT Perusahaan Perseroan Listrik Negara (PLN), told reporters on Friday.

The firm will speed up construction of around 1,200 MW of gas turbine power stations in Grati (East Java) and Tanjung Priok and Muara Karang (Jakarta) using land owned by PLN to reduce risk.

The emphasis on gas would mean Indonesia may need to step up imports of liquefied natural gas (LNG) amid stagnant domestic gas output.

Gas-fired power stations, which currently produce around 24 percent of Indonesia's power, can be built in less than 3 years, much faster than those using coal that could take five years, Syamsuddin said.

The projects, which will cost around $450 million apiece, will probably be funded by the Export Credit Agency, he said, noting that PLN's current profit margin was less than ideal, restricting its ability to finance such projects.

However, an expansion of the 1,000 MW Cirebon coal-fired power station in West Java is also facing setbacks, Syamsuddin said, meaning PLN is still scrambling to fill a 1,800 MW gap in supply.

TOO BIG TO FAIL

The Batang case demonstrates the difficulties of building infrastructure for Indonesia's growing population of 240 million, where community concerns can trump investor plans.

Batang residents and farmers have fought against the construction of the $4 billion Bhimasena Power Indonesia project by a consortium that includes coal miner Adaro, Tokyo-listed Itochu Corp and Electric Power Development Co Ltd (J-Power), fearing it will pollute the area and strip them of their livelihoods.

"This cannot fail," chief economic minister Hatta Rajasa said, noting the Batang project would supply 30 percent of Java's power needs once complete. "If this doesn't happen by 2017-2018, there will be a deficit without any alternatives."

Hatta said the project would not likely be completed until 2018, after he requested a legal review of the land acquisitions and the Batang contract by the Attorney General's Office. (Editing by Muralikumar Anantharaman)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.