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