Indonesia to face power shortage in two years<\/p>\n
JAKARTA (JP): Power blackouts may strike many parts of the
\ncountry in the next one to two years due to power shortages
\ncaused by the absence of investment, power firm executives warned
\non Tuesday.<\/p>\n
David Newell of Unocal Indonesia said \"all indicators\" showed
\nthat Indonesia was on the verge of experiencing a power shortage
\nlate next year or by 2003.<\/p>\n
\"Action needs to be taken now, and even then, time may be too
\nshort to avoid a significant chance of 'lights out',\" David
\nNewell of Unocal Indonesia said in his presentation during a
\nseminar titled Lights On\/Lights Out -- Indonesia's Energy Future,
\nheld by business consultancy firm CastleAsia.<\/p>\n
Yet, he said, new investment would be unlikely, given the lack
\nof funding to finance new power projects.<\/p>\n
Neither the government nor local banks have the capacity to
\ntake up the task, while foreign investors have long abandoned the
\ncountry's power sector since the economic crisis hit the country
\nin 1997, Newell said.<\/p>\n
Foreign investors are still holding out on investment due to
\ndoubts over the country's legal certainty and the slow pace at
\nwhich the country's power industry is being restructured.<\/p>\n
Government data revealed that this year alone, Indonesia needs
\nUS$2.34 billion to build new power plants and power transmission
\nnetworks in order to keep up with demand.<\/p>\n
State electricity company PT PLN has warned that by the year
\n2003, power demand will outstrip supply, when peak demand is
\nlikely to hit 15,441 Megawatt (MW), compared to the installed
\ncapacity of 15,285 MW.<\/p>\n
Newell said Indonesia was one of the most robust power markets
\nin Southeast Asia with an annual 10 percent growth in demand.<\/p>\n
Prior to the economic crisis, PLN had signed agreements with
\n27 IPPs to buy their power in dollars.<\/p>\n
But, the rupiah's steep fall against the U.S dollar during the
\ncrisis crippled PLN's ability to pay for the power as the state
\ncompany sells its power in rupiah.<\/p>\n
To ease the state company's financial burdens, the government
\nallowed PLN to renegotiate all its 27 contracts with the IPPs.<\/p>\n
The move threw many contracts into legal limbo, sending
\njitters among the international financial market that have
\nprovided financing for the IPPs.<\/p>\n
\"Unocal is unwilling to commit additional capital to the power
\nsector, before a fair and reasonable resolution is reached for
\nthe Salak and Sarulla contracts,\" Newell said of Unocal's efforts
\nto renegotiate its two power contracts with PLN.<\/p>\n
The company has invested some US$700 million for its Salak
\ngeothermal power plant in West Java, and the Sarulla geothermal
\npower project in North Sumatra.<\/p>\n
PT Paiton Energy president Ronald P. Landry warned that a
\npower shortage could hamper Indonesia's economic growth.<\/p>\n
He cited data from the Asia Development Bank which said the
\nPhilippines's power shortage in the late eighties had led to a 6
\npercent decrease in its gross domestic product (GDP) growth.<\/p>\n
The government's data say a total investment of $28.45 billion
\nwas needed to restructure the country's battered power sector
\nover the next 10 years.<\/p>\n
Citibank country corporate officer for Indonesia, Michael Zink
\nsaid during the seminar that Indonesia had to compete with its
\nneighbors to attract capital from the global financial market,
\nciting data from the ASEAN Energy Center that Southeast Asian
\ncountries will need a total of at least $69.5 billion until 2010
\nto meet growing demand for power.<\/p>\n
Foreign investors would be looking for power projects across
\nthe regions that offer the best yields, he said.<\/p>\n
But even if foreign banks agreed to lend their capital to
\nIndonesia, he warned, the cost of such loans would be
\nforbiddingly expensive.<\/p>\n
Indonesia's high country risk, and PLN's weak credibility
\nwould demand high premium rates on loans from foreign creditors,
\nhe explained.<\/p>\n
According to him, foreign creditors are put off by Indonesia's
\npoor track record in treating existing IPPs: \"Our experience
\nsays, you're going to lose the money.\"<\/p>\n
However, Zink continued, creditors recognized the government's
\nefforts to restructure the power sector, but pointed out that
\nprogress was too slow.<\/p>\n
Minister of Energy and Mineral Resources Purnomo Yusgiantoro
\nsaid during the seminar the government hopes to raise the private
\nsector's role in the power industry.<\/p>\n
For that purpose, he said, the government sought to restore
\nPLN's financial capability, to bring its electricity rates to a
\nlevel which allowed it to fully recover its operational costs,
\nand help it reach long term settlement with the IPPs. (bkm)<\/p>",
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