Energy investors back to Indonesia
Fitri Wulandari, The Jakarta Post, Jakarta
After being considered a pariah nation for years by power investors, Indonesia has started to regain investor confidence, largely due to the successful resolution of disputes with independent power producers (IPPs), a senior official said on Friday.
Minister of Energy and Mineral Resources Purnomo Yusgiantoro told a discussion at The Jakarta Post that proposals from IPPs to set up new power projects had been on the increase.
The government, which until recently was gripped by worry over a possible power crisis in the future, has become more optimistic that such a crisis will not materialize.
"The investment climate (within the power sector) has been improving," Purnomo said.
He did not elaborate on the number of power project proposals the government had received but said Sumatra, Kalimantan and Java were the regions that had attracted most investors.
Indonesia was embroiled in disputes with dozens of leading global power investors for years after the economic crisis, following the government's decision to suspend most of the power projects, and state electricity firm PT PLN's refusal to honor the contracts.
After years of negotiation, the government managed last year to settle disputes with all 27 IPPs, apart from American firm PT Karaha Bodas Company, which is still pursuing legal redress in the U.S. to win compensation for its suspended project. The firm has a geothermal power project in Garut, West Java.
Of the 26 project owners, 14 agreed to continue projects and reduce the price of the electricity they generate, seven agreed to terminate their projects and five agreed to transfer their projects to state oil firm PT Pertamina and PLN.
Purnomo is optimistic the dispute with Karaha Bodas can also be settled out of court.
Given the protracted dispute and suspension of the projects, most analysts had previously predicted that Indonesia would face a serious power crisis in the near future.
Purnomo, however, dismissed such fears, saying more power plants were due to come onstream this year and in subsequent years to meet the growing demand for power.
Approximately 3,500 MW of additional power supplies will enter the market from 2004 to 2006 with the completion of the Cilegon, Muara Tawar, Cilacap and Tanjung Jati B power projects.
In June this year, completion of the repowering project for the Muara Tawar power plant in Bekasi, West Java, will bring an additional 800 MW into the Java-Bali power grid, while the Cilacap and Cilegon power plants, which are expected to come onstream next year, will add 600 MW and 750 MW respectively to the existing supply. Cilegon is located in Banten, and Cilacap in Central Java.
Another 1,329 MW of capacity will come onstream in 2006 with completion of the giant Tanjung Jati B power plant in Central Java.
"Thus, in the short run, we can cope with additional power demand," the minister said.
Purnomo said although no new factories had been built over the past few years due to lack of investment, demand for electricity from domestic customers had kept growing.
Power demand has been growing at an average of 7 percent annually over the past few years -- higher than the country's economic growth of about 4 percent.
The national power supply now stands at 21,000 MW, with the Java-Bali grid accounting for 18,600 MW of this.