P

T Penjaminan Infrastruktur Indonesia (PII), a government-sponsored infrastructure financing guarantee agency, will soon provide a guarantee for the construction of a Rp 30 trillion (US$3.3 billion) power plant in Central Java, the company’s executive said.

PII president director Sinthya Roesly said in Jakarta that the decision was made after the government issued the 2010 presidential decree on the financing guarantee for infrastructure projects conducted under the public-private partnership scheme.

Sinthya praised the government for issuing the presidential decree, saying that such a step would be a big leap to accelerate vital infrastructure developments in the country. “The ground rule will enable us to start guaranteeing infrastructure projects, including the PLTU Jawa Tengah coal-fired power plant with a total capacity of 2 times 1,000 megawatts in Central Java,” she told a press conference in Jakarta.

The guarantee was planned last year but could not be realized because the President had not issued the decree.

Sinthya hoped that with guarantees from PII, investors’ confidence would grow in the country’s infrastructure development project that took between five and 15 years to complete.

PII will cover financial loss risks that might appear from government or non-government actions like regulation changes, late permission issuance and the absence of tariff adjustment, Sinthya said.

The head of Fiscal Risk Management Center at the Finance Ministry, Freddy Rikson Saragih, who also attended the press conference, said that the coal-fired power plant project would be the first project conducted under the public-private partnership scheme.

“Previously, private investors were reluctant to invest in public infrastructure developments in Indonesia due to the country’s unstable political condition,” Freddy told reporters.

He claimed that the presidential decree was a breakthrough that might boost investments in infrastructure developments. The Finance Ministry, he continued, had also ordered PII to take necessary measures to guarantee and improve the coal-fired power plant’s creditworthiness. In late December last year, the ministry had issued a ministerial decree to provide a detailed explanation how to implement the presidential decree, Freddy reported.

Murtaqi Syamsudin, business and risk management director at state electricity company PT PLN, said that the issuance of the guarantee would pave the way for the company to continue the tender process to choose the contractor to build and operate the coal-fired power plant in Central Java.

“Seven companies and consortiums of companies have passed our pre-qualification process,” he said.

The seven bidders were Mitsubishi Corporation, China Yudean and CNTIC consortium, GDF Suez and J-Power consortium, Marubeni, Korea Electric Power Corporation (Kepco) and Guohua Electric Power Company (GEPC), Murtaqi explained.

Murtaqi said the operation of the new coal-fired power plant would boost the electrification ration in Java-Bali from only 70 percent currently to between 80 percent and 85 percent in 2016. PLN is to be the representative of the Indonesian government in supervising the power plant development project, Murtaqi reported. He added that the construction of the power plant was estimated to start in early 2012. He said that the firm had not determined the location of the planned power plant. Currently, the firm is still conducting studies to find a suitable location for the power plant by considering energy balances in Java.