Govt prepares new rules on investment in power sector
Govt prepares new rules on investment in power sector
Fitri Wulandari, The Jakarta Post, Jakarta
The government is drafting a regulation for investment in the
country's power sector to ensure that future power projects are
in line with the national electricity plan.
"Power projects in the future should be in line with a supply-
demand balance and financial capability," Director General of
Electricity and Energy Utilization Yogo Pratomo said at a
discussion on power investment on Friday.
Yogo explained that state-owned power firm PT Perusahaan
Listrik Negara (PLN)) would draw up a list of power projects in
its power supply plan, which would be based on the government's
2004 to 2013 National Electricity Plan.
"PLN will then choose which projects will be handled by them,
based on their financing capability and which projects are to be
offered to investors through competitive bidding," Yogo said.
The regulation on private power projects aims to prevent past
failures with independent power producers (IPPs). Before the late
1990s regional economic crisis, the government allowed private
investors to build their own power plants and to sell power to
PLN. This was made without clear planning, in terms of both
demand-supply aspects and financing capacity.
There were 27 IPPs that obtained licenses to build power
plants. But the projects were allegedly marred by collusion,
without a transparent bidding process, forcing PLN to pay a high
price for the power.
Following the crisis, the government was forced to delay the
projects, leaving it in lengthy disputes and negotiations with
the IPPs.
Last year, the government managed to renegotiate the power
price with 26 IPPs. However, it lost a legal battle with U.S.-
based power firm Karaha Bodas Company (KBC) last February and has
to pay US$290 million in compensation.
"These projects (the IPPs), were not in the government's plan.
Thus it was not clear who established them," Yogo said.
Based on the National Electricity Plan, Indonesia needs an
additional power capacity of 23,443 megawatts (MW) to boost the
capacity of existing power plants to 54,528 MW by 2013. It needs
an investment of US$23.4 billion, and another $7 billion to $8
billion for the construction of transmission and distribution
facilities.
The plan is based on a number of assumptions, including
average annual economic growth of 4 percent to 5 percent, and
population growth of 0.9 percent.
Yogo added that in the future the government would not provide
a government guarantee for the investors. Any commercial risks
would be born by the investors.
"The government would not be involved in the business-to-
business negotiation," Yogo said.
He said this was aimed at preventing the government from being
involved in a commercial dispute and ending up paying huge
claims.