East Java best equipped for new smelters: PLN

State power utility PLN has suggested that mineral producers build smelters in East Java, a province currently enjoying an electricity surplus, in a bid to comply with the government’s 2014 metal ore export ban.

The company’s president, Nur Pamudji, said that PLN was not reluctant to build smelters in eastern Indonesia, but that setting up smelters in East Java would be faster and more economically competitive.

“Every day, around 3,000 megawatts [MW] of electricity from East Java is transferred to Jakarta. In the near future, new power plants will go on-stream in Paiton, Tanjung, Awar-Awar and Pacitan. There will be no problem if more smelters are built in the province,” he told reporters after a meeting at the Indonesian Chambers of Commerce and Industry (Kadin) in Jakarta on Thursday.

The province also has good supporting infrastructure. “Ports in Tuban and Situbondo could become hubs for both ore and product shipments. The residue of smelting activity could be sold to local cement factories,” he continued.

Electricity rates for industrial consumers in East Java are currently Rp 810 (9 US cents) per kilowatt-hour. Outside Java, before 2014, the rate would be above 10 cents.

“It would be possible to build a 140 MW oil-fired power plant outside Java in less than a year. Diesel plants are easier and cheaper to commission, but the use of oil-based fuel implies a rate above Rp 1,000 per kWh,” he emphasized. To build a coal-fired power plant, PLN will need around four years to procure land, conduct environmental impact analyses (Amdal) and obtain permits.

As many as 10 companies have come to PLN seeking electricity supplies for planned smelters. Kadin chairman for industry, research and technology, Bambang Sujagad, said the chamber would produce a detailed assessment of the locations of proposed smelters in Indonesia.

“A team of Kadin members and PLN officials will hammer out the details later, but our analysis will be of great assistance to PLN and to businesspeople during their financial planning,” he said.

According to Kadin chairman for trade, distribution and logistics Natsir Mansur, the Energy and Mineral Resources Ministry has received 167 applications to construct smelters. However, it was unclear how many of those companies had serious intentions to actually undertake the projects they had put forward.

“If as few as 40 percent of them can really execute their plans and build smelters, it will still be very good news for our country,” he said, claiming that the chamber had a target of an additional 40 smelters before 2014, requiring a total of 1,500 MW of electricity supply to sustain their operations.

Pamudji said PLN would be ready to provide that amount of power, the company already having anticipated the addition of 4,000 MW per year to their total power capacity.