Tanjung Jati B set to resume construction, says PLN

A'an Suryana, The Jakarta Post, Jakarta

Construction of the Tanjung Jati B power plant is set to resume in April this year, after a tough two-year round of negotiations with the independent power producer (IPP), a senior official at the state electricity firm PT PLN said on Tuesday.

Japanese trading house Sumitomo Corp. will lead the construction project and it should be completed by 2005, said Eddie Widiono Suwondo, the president director of the firm.

"The project has been delayed because the government needs some time to approve the funding for it," Eddie told The Jakarta Post.

The government has pledged to provide some indirect financial support, ensuring that the project will be owned by both the state and Sumitomo.

The project was part of the 27 power projects signed by PLN in the 1990s, but the economic crisis, which struck the country in 1997, forced the government to postpone most of them.

In order to boost investment and infrastructure projects, as well as to avoid an imminent power crisis in 2004 and 2005, the government ordered last year that the IPP projects had to be resumed, including the Tanjung Jati B project.

Eddie said that the 1,320 Mega Watt Tanjung Jati B thermal power plant, located in Central Java, would require a total investment of US$1.6 billion.

Funding for its construction will come from the Japan Bank for International Cooperation (JBIC) and the syndication of other Japanese-based financial institutions.

Once construction is completed, the power plant will be leased to PLN.

"The lease will last for 20 years, and after that PT PLN will fully own the power plant," said Eddie.

Before the lease is up, PT PLN has to pay a certain power rate per kilowatt hour (kWh) for the electricity from the power plant.

However, Eddy did not disclose the rate.

The Tanjung Jati power plant is expected to start operations by 2006.

"We are hoping that it can add to the power capacity for the Java and Bali areas, so that it can prevent a possible power crisis forecasted for that year," Bambang Hermiyanto, PT PLN's operations director, told the Post.

The Tanjung Jati B project was initially owned by a consortium led by a Hong Kong developer.

Initially, Sumitomo had only participated as a construction firm, but it decided later to take over the leadership of the project.