PLN, Krakatau Posco seal power supply agreement

Steel maker PT Krakatau Posco, a joint venture between state-owned Krakatau Steel and Korean steel producer Posco, will buy electricity from state-owned company PLN to support the company’s steel making operation.

Under the agreement signed in Jakarta on Friday, Krakatau Posco will receive a premium electricity supply of 165 megavolt ampere (MVA) from PLN for 10 years at a price of Rp 810 (US 9 cents) per kilowatt-hour (kWh).

With that price, Krakatau Posco’s electricity bill is estimated to reach Rp 53 billion (US$5.88 million)
per month.

The premium service means PLN will ensure an uninterrupted power supply for the contract’s duration. If there is a blackout, PLN will have to pay a Rp 530 million fine or 1 percent of Krakatau Posco’s electricity bill per blackout.

“This agreement shows that the businesses trust PLN’s reliability in ensuring electricity supply to their production facilities,” PLN planning and risk management director Murtaqi Syamsuddin told reporters after the signing ceremony at the company’s office in Jakarta.

The 165 MVA supply will be divided into three phases. In the first phase, Krakatau Posco will receive 80 MVA starting November 2012. In the second phase, the power capacity will be raised into 100 MVA in July 2013. The steel producer will start using the full capacity of 165 MVA in January 2014.

Krakatau Posco’s investment in the production plant in Cilegon, Banten reached $6 billion, and was projected to bring significant benefits to Indonesia’s economy — therefore, PLN was committed to provide reliable and high quality services for the steel maker, Murtaqi said.

Krakatau Posco president director Kim Dong-ho reported that the production plant, which is now under construction, would begin commercial operation in December 2013 with an output capacity 3 million tons of steel.

“Once the steel mill is ready, it will be operated 24 hours per day for 30 years. That’s why we need reliable electricity supply,” he said during his speech at the signing ceremony.

PLN marketing division head Benny Marbun revealed at the signing that the deal would make Krakatau Posco PLN’s biggest customer. The previous biggest customer only had a total capacity of 75 MVA.

“In nine months to come, we’ll complete the construction of a transmission network to supply electricity to Krakatau Posco,” he said.

PLN divides its premium service into two categories – platinum and gold. The price for the platinum service is Rp 810 per kWh and gold Rp 745 per kWh.

Murtaqi claimed for industrial customers, the electricity price was not really an issue as long as the supply was reliable.

Currently, seven companies use PLN’s premium services, including PT Asahimas, PT Semen Gresik and PT Holcim Tuban.

“We’re grateful, as of today, there is no power supply interruption for customers using our premium services,” Murtaqi said.

In July last year, PLN signed a similar agreement with Korea-based Hankook Tire to supply 60 MVA of electricity to its production plant in Bekasi, West Java, for 20 years starting March 2012. Hankook Tire uses the gold service category.