Government Scrambles to Find New Power Investors
The central government is desperately seeking new investors, including from the Middle East, to finance its stalled $8 billion “fast-track” energy expansion program, after a consortium of Chinese banks - the major backers of the progra m - apparently dropped out due to a separate trade dispute with Indonesia over a stalled deal to purchase 15 commercial turboprop aircraft.
“We are looking for other sources of funding, for example, from the Middle Eastern countries, given that they earned windfall profits from soaring crude oil prices last year,” said Energy and Mineral Resources Minister Purnomo Yusgiantoro on Tuesday. “However, China must still fulfill the contracts it has signed. It has to disburse the funds. We hope to resolve the issue with China in an amicable way.”
State-owned electricity firm PT Perusahaan Listrik Negara has been speaking to the Qatar Investment Bank through its Malaysian unit, the Asian Finance Bank, about financing the fast-track program, according to Hilmi Gasim, an assistant to Alwi Shihab, the government’s special envoy to the Middle East.
‘China still has to disburse the funds. We hope to resolve the issue in an amicable way.’
Purnomo, Energy Minister
“They have been discussing the possibility of getting financial backup,” Hilmi said. “The negotiations could be difficult as Middle Eastern investors usually demand tight terms.”
President Susilo Bambang Yudhoyono said on Feb. 10 that PLN might have to rely more on domestic banks to finance the completion of the first stage of the program in the wake of the seemingly inevitable withdrawal of the Chinese consortium.
On Monday, Purnomo said the consortium had postponed most of the projects under the multibillion dollar deal in retaliation for PT Merpati Nusantara Airlines’ failure to abide by a contract to purchase 15 MA-60 turboprop aircraft from Chinese firm Xi’an Aircraft Industry Co.
The fast-track program aims to bring 10,000 additional megawatts of generating capacity on stream by the end of 2010. Purnomo has accused China of holding the power program hostage to the Merpati dispute.
China has threatened to haul Indonesia before an international arbitration tribunal, seeking $90 million in damages from the stalled $232 million deal. In an apparently tit-for-tat response, the energy minister on Monday threatened similar action relating to the power program. The Merpati dispute has soured bilateral relations between China and Indonesia, and there are fears that it could trigger a wider trade war.
However, Sofyan Djalil, the state enterprises minister, on Tuesday denied any connection between the Merpati dispute and the fast-track program.
“Merpati is not delaying the fast-track program as the two contracts were entered into by different bodies,” he said, adding that officials were continuing to seek solutions to the disputes.
Merpati agreed to purchase the planes in 2006 using a soft loan provided by the Chinese government, but later tried to back out after being saddled with financial problems.
A senior Indonesian lawmaker has called for a corruption investigation into the deal, saying officials may have colluded to mark up the prices, and pocket the difference.
“We are looking for other sources of funding, for example, from the Middle Eastern countries, given that they earned windfall profits from soaring crude oil prices last year,” said Energy and Mineral Resources Minister Purnomo Yusgiantoro on Tuesday. “However, China must still fulfill the contracts it has signed. It has to disburse the funds. We hope to resolve the issue with China in an amicable way.”
State-owned electricity firm PT Perusahaan Listrik Negara has been speaking to the Qatar Investment Bank through its Malaysian unit, the Asian Finance Bank, about financing the fast-track program, according to Hilmi Gasim, an assistant to Alwi Shihab, the government’s special envoy to the Middle East.
‘China still has to disburse the funds. We hope to resolve the issue in an amicable way.’
Purnomo, Energy Minister
“They have been discussing the possibility of getting financial backup,” Hilmi said. “The negotiations could be difficult as Middle Eastern investors usually demand tight terms.”
President Susilo Bambang Yudhoyono said on Feb. 10 that PLN might have to rely more on domestic banks to finance the completion of the first stage of the program in the wake of the seemingly inevitable withdrawal of the Chinese consortium.
On Monday, Purnomo said the consortium had postponed most of the projects under the multibillion dollar deal in retaliation for PT Merpati Nusantara Airlines’ failure to abide by a contract to purchase 15 MA-60 turboprop aircraft from Chinese firm Xi’an Aircraft Industry Co.
The fast-track program aims to bring 10,000 additional megawatts of generating capacity on stream by the end of 2010. Purnomo has accused China of holding the power program hostage to the Merpati dispute.
China has threatened to haul Indonesia before an international arbitration tribunal, seeking $90 million in damages from the stalled $232 million deal. In an apparently tit-for-tat response, the energy minister on Monday threatened similar action relating to the power program. The Merpati dispute has soured bilateral relations between China and Indonesia, and there are fears that it could trigger a wider trade war.
However, Sofyan Djalil, the state enterprises minister, on Tuesday denied any connection between the Merpati dispute and the fast-track program.
“Merpati is not delaying the fast-track program as the two contracts were entered into by different bodies,” he said, adding that officials were continuing to seek solutions to the disputes.
Merpati agreed to purchase the planes in 2006 using a soft loan provided by the Chinese government, but later tried to back out after being saddled with financial problems.
A senior Indonesian lawmaker has called for a corruption investigation into the deal, saying officials may have colluded to mark up the prices, and pocket the difference.