RI struggles to lure electricity investments
A'an Suryana, The Jakarta Post, Jakarta
Finalizing the renegotiation of power purchase agreements (PPAs) and completing the new electricity bill were seen as strategic steps in a bid to lure new foreign investment into the country's power sector, Coordinating Minister for the Economy Dorodjatun Kuntjoro-Jakti said on Tuesday.
New investment was badly needed to avoid a power shortage as demand for electricity was growing at a rate of 9 percent per year, he said.
"Indonesia will face an electricity crisis by 2004 and 2005 if the pipelines of electricity projects are not completed."
Renegotiation is a move to recommence projects as well as to lift investors' confidence," he said after a seminar on investment in the country's electricity sector.
Dorodjatun said that the government had been trying to renegotiate PPAs with some 27 independent power producers (IPPs).
The government had finalized its renegotiation with several IPPs. The latest one is with PT Paiton, which develops the Paiton I and Paiton II power projects.
Under the original PPAs, the government was supposed to purchase power from the IPPs at prices, which some said were very expensive. In the wake of the late 1990s economic and financial crisis, the government halted the power projects of the IPPs. The government then ordered state-owned electricity company PLN to renegotiate the PPAs, particularly the power purchasing price.
Meanwhile, PLN president Eddie Widiono also said that renegotiating the PPAs was the company's top priority.
"Should renegotiations with the existing IPPs have (all) been completed, this would help us attract new investors," Eddie said.
Dorodjatun said the renegotiation of PPAs was part of the government's agenda to spur the growth of infrastructure projects.
The first step has been carried out with the recommencement of 13 megaprojects last week, and this will be followed with other infrastructure projects.
"Infrastructure development is very important to establish a solid foundation for our (economic) competitiveness," he said.
According to PLN data, Indonesia needs some US$28.5 billion in new investments in the electricity sector, with the demand for power in 2004 to reach 16.93 gigawatts from 14.26 gigawatts this year.
Legal certainty is seen as another crucial factor in enticing foreign investment into the country.
In a bid to create legal certainty in the power sector, the government has drafted a new bill on electricity, said Luluk Sumiarso, the director general for electricity and energy utilization at the Ministry of Energy and Mineral Resources.
The bill is being deliberated by the House of Representatives.
Luluk said immediate completion of the bill was a must since investors were waiting for solid legal framework and legal certainty before they would start business here.
However, it will take some time before the bill is passed into law.
"It is difficult to complete the bill quickly since most of the legislators are not familiar with electricity matters," Emir Moeis, a member of the House, said.
He added that new investments in the electricity sector were urgently needed.
Energy analyst A. Abdulkadir said that new investments in the power sector since the outbreak of the 1997 economic crisis were almost nonexistent.