RI struggles to lure electricity investments
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.