JAKARTA (Reuters) - A power plant in Indonesia’s Central Java province could generate revenue of $80 million per month for the consortium that will build and operate it, the CEO of Indonesian coal producer PT Adaro Energy Tbk told Reuters.
The 2,000-megawatt Batang coal-fired power plant - which will be run by venture partners Adaro, Japan’s Itochu Corp and Electric Power Development Co Ltd (J-Power) - is expected to be completed in early 2020, Adaro CEO Garibaldi “Boy” Thohir told Reuters in an interview.
Indonesian President Joko Widodo on Thursday attended the financial closure ceremony for the plant, which has been delayed for years as dozens of farmers had refused to give up their land. Widodo has pledged to boost Indonesia’s electricity capacity by two-thirds by 2019, but the ambitious proposal has been dogged by postponements and reversals.
“The driving force for this project is the president himself,” Thohir said. “This is a public-private partnership that definitely has to go ahead as he wants to show to the world that the Indonesian government can solve an issue.”
Adaro, Indonesia’s biggest coal producer by market value, plans to bid for two more power plant projects in Indonesia’s Sumatra and Java islands to raise its total capacity to around 5,000 megawatts in the next five years, Thohir said.
Coal mining contributes around half of Adaro revenue, but the company plans to diversify further into power generation and logistics in Indonesia, said Thohir, who has been in the coal business since 1992.
Widodo’s plan for Southeast Asia’s biggest economy calls for it to add 35,000 megawatts in power capacity by 2019.
To be a part of that, Adaro has been switching its focus away from exports, Thohir said.
“For Adaro, going into the medium to long term, we are playing the domestic story.”
Earlier this week, Adaro agreed to buy BHP Billiton’s 75 percent stake in the IndoMet Coal project for $120 million, slightly more than a third of the price that the Indonesian company paid for 25 percent of the asset six years ago.
Adaro will fund the acquisition with internal cash, said Thohir, who last year was ranked by Forbes as one of Indonesia’s 50 richest people. The company has no plans to make further coal mine acquisitions at the moment, he said.
Adaro sees coal prices rising 5-10 percent in the next 2-3 years due to the consolidation of supply, Thohir said.
The company expects to maintain its production at 52 million-54 million tons this year, he said, but added that he expected fewer than 10 Indonesian coal producers to survive out of hundreds as cash flows dry up because of low prices.
“Previously people were in a denial stage, but now they have woken up to the reality. If they continue bleeding, they can’t go on,” Thohir said.
The benchmark Asian coal price is now trading around $55 per ton - less than a third of its 2008 peak - due to oversupply and a slowdown in demand from China, one of the world’s top consumers of the commodity.
Reporting by Eveline Danubrata; Editing by Tom Hogue