Govt approves four power contracts

Govt approves four power contracts

Moch. N. Kurniawan, The Jakarta Post, Jakarta

The government has approved new power contracts with four
independent power producers (IPPs), a move that should help the
country avoid a power crisis, the director general for
electricity and energy utilization, Luluk Sumiarso, said on
Tuesday.

He said the four IPPs had been contracted to develop the
Gunung Salak geothermal power plant in West Java, the gas and
coal-fired Palembang Timur plant in South Sumatra, North
Sulawesi's Amurang plant and the Sibolga plant in North Sumatra.

"The government has approved four IPP contracts. (State-owned
electricity company) PLN will carry out the next step," he said.

Luluk declined to provide any details, and the president of
PLN, Eddie Widiono, could not be reached for comment.

The four IPPs were among the 27 independent power producers
whose projects were suspended by the government in 1998 in the
wake of the economic crisis.

The government suspended the projects to prevent PLN from
sliding into bankruptcy, as under the contracts PLN would have
purchased power from the IPPs at relatively high dollar-based
rates at a time when the rupiah was plunging in value.

Following the suspensions, the government instructed PLN to
renegotiate the contracts, initially signed in the early 1990s.

PLN earlier completed renegotiations with six IPPs, with the
new contracts having been approved by the government. In total,
10 new contracts have been approved.

The other six contracts are for East Java's Paiton I and
Paiton II plants, the Darajat II plant in West Java, South
Sulawesi's Sengkang plant, the Pare-Pare plant in Central
Sulawesi and Central Java's Tanjung Jati B plant.

Observers expect these new contracts to be longer in duration
and to include lower power rates.

Several of the 10 IPPs already have begun supplying power to
PLN, while the others are still in the process of completing
their projects.

The government earlier issued a decree allowing the resumption
of the power projects in order to avoid a power crisis.

PLN issued a statement earlier warning that Java and Bali
would suffer power shortages by 2006 despite the completion of
the coal-fired Tanjung Jati B plant in 2004 or 2005.

It added that about 28 areas outside Java and Bali were in a
critical stage, meaning that they were susceptible to power
blackouts at anytime.

Some areas in Sumatra, Maluku and Sulawesi have seen rotating
blackouts.

PLN reportedly has taken the necessary measures to cope with
the problem, ranging from repairing power plants to purchasing
power from private producers.

Luluk said he expected more contracts with IPPs would be
approved by the government by the end of this year.