Guarantee for 2nd 10,000
MW project prepared

The government is preparing a guarantee scheme for independent power producers (IPPs) involved in the second-phase of 10,000 megawatt (MW) power project, possibly on similar lines to the guarantees given during the first phase of the project.

Energy and Mineral Resources Ministry Purnomo Yusgiantoro said, however, the government has yet to clarify how the guarantee would be formulated and to what extent it would give cover.  

“We will study the form of guarantee that we will produce,” Purnomo told reporters on the sideline of a seminar on IPPs on Wednesday.

The government’s guarantee could be in several formats, with different levels of cover: for example sovereign guarantee would mean the government would back the state power firm PT Perusahaan Listrik Negara (PLN) in case the latter failed to pay for electricity utilization, another format would simply comprise an “acknowledgement”, according to Purnomo.

“We will evaluate all the possibilities and [once decided] we will include this in a specific presidential regulation,” he added.

Purnomo said the presidential regulation would ensure the mandate for PLN to organize the second-phase 10,000 MW project. The regulation will also specify the power plant projects included in the program.

J.Purwono, the director general for electricity and energy utilization at the Energy and Mineral Resources Ministry, said the regulation was expected by the end of this month.

The second-phase of the 10,000 MW project is expected to start in 2012 with power generation starting in 2014. Total project capacity will be about 9,963 MW. The IPPs are expected to generate about 40 percent of this capacity.

The first-phase program was launched in 2006 to meet the increasing demand for electricity nationwide, especially for the Java-Bali system. All the power plants in the first-phase of the program belong to PLN, with contractors enjoying government guarantees that PLN would fulfill all its obligations.

Some IPPs have expressed the view that there should be a similar guarantee for contractors working on the second-phase project

Stewart W.G. Elliot, president director of PT Energi Sengkang suggested the government should also give a similar letter of comfort for IPPs involved in the second-phase program.

“The [guarantee produced for) the first phase is working very well. In the first phase the government provided a letter of comfort which guaranteed the obligations of PLN. It’s not a full guarantee.  It’s good for the Indonesian government and it’s good enough [for us to seek loans] from banks,” Elliot said.

He said that PT Energi Sengkawang, which was currently operating a power plant with a total capacity of 200 MW, was looking forward to take a part in the second-phase program, but did not give details on the projects in which the company had an interest.

Purnomo said the second-phase crash program would involve a significant proportion of alternative energy sources, with geothermal energy generating 4,733 MW, hydro-power 1,174 MW, and coal and gas for the remaining 4,056 MW. He said the required total investment for the program was provisionally US$15.32 billion.

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