JBIC completes review of Tarahan power project

The Jakarta Post, Jakarta

The Japan Bank for International Cooperation (JBIC) says it has completed a review of the Tarahan 3 power plant project in South Sumatra.

"We hereby inform you that the results of the evaluation have been reviewed and concurred," the agency said in a May 6 letter to state-owned power firm PT PLN, which owns the power plant project.

The letter, a copy of which was obtained by The Jakarta Post on Wednesday, was signed by JBIC's chief representative here, Ikuro Sato.

PLN had to delay the construction of the coal-fired power plant Tarahan 3 and Tarahan 4 because JBIC as the financier of the project was unable to finish the evaluation of the tender results for the Tarahan 3 project by the end of last year.

The construction of both power plants was scheduled to start before the end of last year to be completed by the end of 2006. Each of the power plants has a capacity of 100 megawatts and both are valued at US$350 million.

There was no immediate information regarding the long review by the JBIC. However, sources suggested it might be linked to PLN's decision to name a consortium consisting of Alstom Power Inc., Marubeni Corporation, and PT Alstom Power Energy System Indonesia as the winner for the construction of circulating fluidized bed (CFB) boilers in both power plants.

A CFB boiler is an environmentally friendly type of furnace that can use low-grade coal. This type of coal, which accounts for 60 percent of Indonesia's coal reserves, cannot be used in power plants equipped with standard boilers.

The delay raised concern that it would prolong the power crisis in Sumatra as the power plant may not be available until early 2007 at the earliest.

Installed power generation capacity in Sumatra currently stands at 580 MW with the demand at about the same amount. A power grid should have a power reserves amounting to 30 percent of the capacity.

Eko Sulianto, director of PT Alstom Power Energy System Indonesia confirmed the completion of the JBIC review.

"Yes, we have received the letter on the completion of the tender results for Tarahan 3," Eko told The Jakarta Post on Wednesday.

He said the company was close to concluding negotiations with PLN for the completion of a number of construction projects including the CFB.

It expects to sign the contract for the construction at the end of June.