Thu, 08 Jun 2006
Power shortages deterring new investment

Benget Simbolon Tnb., The Jakarta Post, Jakarta

The government's efforts to attract new investment will come to naught if state-owned power firm PLN cannot provide enough electricity, a senior businessman has said.

"Currently, many companies want to expand but they cannot do so due to the shortage of electricity from PLN," said Sofjan Wanandi, the chairman of the Indonesian Employers Association (Apindo).

He said that PLN, given its current capacity, was unable to meet any additional power demand from industry.

Sofjan acknowledged that the government had launched a crash program to build a number of coal-fired power plants to provide an additional 10,000 MW of power over the next three years.

However, he doubted the program would achieve the desired results because of difficulties in securing coal and gas supplies for the new plants.

"PLN needs more coal and gas if it wants to expand its power supply. But this will be difficult given various problems affecting our energy resources," he said Tuesday.

Most of the country's gas production is exported to Japan and South Korea in the form of liquefied natural gas under long-term contracts, most of which will end in 2010. While there are a number of contracts that will expire in 2008, these mostly involve relatively small amounts of gas. Sofjan said the use of coal also entailed problems, such as the high cost of constructing the necessary transportation infrastructure.

Benny Sutrisno, the chairman of the Indonesian Textiles Association (API), echoed Sofjan's comments, saying his firm had not been able to go ahead with a planned expansion due to power problems.

"They (PLN) don't have enough power. But they said they could supply additional power if we paid 300 percent more than the normal power price," he said.

The current power price is around seven U.S. cents per kwh during off-peak hours, and 30 percent more during peak time from 6 p.m. to 10 p.m.

"PLN needs to urgently address this problem. But I doubt they will be able to resolve it any time soon," Benny said. "Passing new investment legislation offering more incentives to investors will be useless if PLN cannot meet the additional industrial power demand."

According to Lili Asdjudiredja, chairman of API's West Java branch, many textile firms in the province had been forced to abandon expansion plans due to the shortage of power.

"The government needs to complement its efforts to attract investment with action to increase power supply," he said.

The government hopes its crash power-plant-construction program will prevent an electricity crisis and minimize state electricity company PLN's dependence on oil-based fuels for power generation. At present, plants fired by such fuels account for about 30 percent of total generating capacity.

As part of the program, China has agreed to construct a number of coal-fired power plants in Indonesia.



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