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tate-run cement producer Semen Indonesia kicked off on Wednesday the construction of a 30.6 Megawatt (MW) power plant in an effort to reduce the company'€™s electricity costs.

Located at its cement factory in Tuban, East Java, the power plant will cost the company Rp 638 billion (US$52.95 million) in investment. The power plant will make use of the heat generated from the cement factory.

The construction of the waste heat recovery power generator (WHRPG) is scheduled to take 26 months. It is expected to start operating in the second half of 2016.

Last year, Semen Indonesia signed a memorandum of understanding (MoU) with Japan-based JFE Engineering Corporation for the WHRPG construction.

'€œThis will be the first project in Indonesia where waste heat in the whole area is utilized to supply the power plant,'€ Semen Indonesia president director Dwi Soetjipto said in a written statement.

The company has applied similar technology at its Indarung facility in Padang, West Sumatra, albeit on a smaller scale. Indarung power plant'€™s capacity is 8.5 MW and it started operations in 2011.

The statement explained that the power plant would use waste heat from gas generated by cement production to fuel its operation.

Once the power plant was completed, Dwi said that Semen Indonesia would be able to supply about one third of the company'€™s energy needs at the Tuban compound. It could save Rp 120 billion in electricity costs a year.

For its four existing factories in Tuban, Semen Indonesia requires as much as 140 MW from state electricity company PT PLN.

Electricity costs are the biggest pressure on Semen Indonesia'€™s net profit and a further rise in electricity tariffs this year is projected to bring a bigger burden for the cement industry.

As of May 1, the government raised electricity prices by either 38.9 percent or 64.7 percent, depending on businesses'€™ power consumption.

The increases, however, are being phased in gradually every two months until the end of the year.

Semen Indonesia is among those firms facing a 64.7-percent increase in electricity prices.

Semen Indonesia, according to its published annual report, saw its energy usage rise by 13.2 percent year-on-year (y-o-y) to 2.52 million MW per hour in 2013.

Its electricity costs during the year rose by 30.1 percent y-o-y to Rp 1.88 trillion.

The company'€™s electricity costs made up about 39.8 percent of its total costs last year.

To suppress electricity costs, big companies '€” including Semen Indonesia '€” have started to build power plants to slash rising expenses following increasing production and soaring tariffs.

In February, Semen Indonesia commenced the operation of the Tonasa V facility in Pangkep, South Sulawesi, which is equipped with a 2x35-MW coal-fired power plant to support its operations.

As previously reported, Semen Indonesia is also considering building a 100-MW coal-fired power plant to supply its facilities in Padang, the construction of which is expected to start next year.

The coal-fired power plant is designed to respond to rising power needs once the company'€™s Indarung VI starts commercial operations in 2017.

Indarung VI started construction earlier this year, with a total investment of around $352 million, and was designed to produce up to 3 million tons cement a year.

The company'€™s Padang facilities need about 150 MW to support operations.