PLN delays Tarahan projects

Dewi Santoso, The Jakarta Post, Jakarta

State-owned electricity firm PT Perusahaan Listrik Negara (PLN) has delayed the construction of the coal-fired power projects in Tarahan, South Sumatra, raising concerns among industry players.

According to documents made available to The Jakarta Post, the projects, named Tarahan 3 and Tarahan 4, were initially scheduled to start before the end of last year and 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.

However, the Japan Bank for International Cooperation (JBIC), the financier of the project, could not finish the evaluation of the tender results by the end of last year. The bank had promised to cover 80 percent of the projects' costs with the remaining 20 percent to be covered by PLN.

An official from the JBIC's representative office in Jakarta said over the weekend that the evaluation of the tender results for Tarahan 4 had been completed but the tender results for Tarahan 3 were "still under review".

The official, who identified herself as Ita, refused to specify when the review was expected to be completed.

"According to our regulations, we can't disclose any information on ongoing project evaluations," she told the Post by phone.

It remains unclear what the reasons are behind the slow pace of the review by the JBIC, but some sources speculate that it is related to PLN's decision to name Alstom Power Inc./Marubeni Corporation/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, can't be used in power plants equipped with standard boilers.

A source at PLN said that with the delay, the construction of the plants would be completed by the end of 2007 at the earliest, thus leading to a prolongation of the "power crisis" in the southern part of Sumatra, including Lampung and South Sumatra.

At present, the region has installed power generation capacity of 580 MW, while the demand is about the same. In order to ensure security of power supplies, a power grid should have a power reserve amounting to 30 percent of capacity.

"Thus, people in the region will live longer under the threat of power blackouts," the PLN source said.

He explained that a longer delay would inflate the plants' construction costs. This would in turn lead to an increase in the price of the electricity produced by both plants, thus further burdening the people in the region.

"Thus, the government and the House of Representatives need to push the JBIC to speed up the review of the tender results," he said.