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Mega power project gets legal backing
President Joko âJokowiâ Widodo is set to issue a set of regulations to give legal protection to policymakers responsible for the construction of power plants in Indonesia as he races against the clock to realize an ambitious plan to build facilities to generate an additional 35,000 megawatts (MW) in five years
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resident Joko 'Jokowi' Widodo is set to issue a set of regulations to give legal protection to policymakers responsible for the construction of power plants in Indonesia as he races against the clock to realize an ambitious plan to build facilities to generate an additional 35,000 megawatts (MW) in five years.
The President unveiled the plan on Thursday after a limited Cabinet meeting with ministers and executives of state-run electricity company PLN on Thursday to discuss the progress of the power plants' construction.
Jokowi pledged to provide the required legal support so that officials could solve on-field obstacles swiftly without having to worry about potential legal and administrative problems.
'The meeting agreed on the issuance of presidential regulations on the 35,000 MW electricity project related to the procurement of the generators, transformers and electricity stations and PLN's financial health,' said Teten Masduki, a member of the President's communications team.
In addition, the regulations would also address issues such as business permit and land procurement processes, while also giving a mandate to regional administrations to support the projects, he explained.
Energy and Mineral Resources Minister Sudirman Said stated that the projects were so far on schedule. Of the included projects, at least 19 percent had entered the construction phase, he said.
Of the 212 new power plant projects, the minister explained, at least 100 had completed their land procurement process.
'Given the first year's progress, we are optimistic that we can achieve the set targets,' Sudirman said.
A Cabinet meeting held in December 2014, two months after Jokowi took office, concluded that Indonesia was in the midst of an 'electricity crisis' as power demand in the country continued to outpace supply, highlighting the need for the development of large-scale electricity projects.
For Indonesia to record annual economic growth of between 6 percent and 7 percent, the country needs to increase its electricity capacity by at least 7,000 MW a year, according to estimates from the Energy and Mineral Resources Ministry. The economy slowed to a five-year low of 4.7 percent in the first quarter this year.
The presidential regulation, meanwhile, will complement regulations issued by the Energy and Mineral Resources Ministry in January that permit direct appointments for investors with established track records in constructing power plants.
Officials involved in the development of large-scale infrastructure projects, notably power plants, have been forced to walk a thin line when trying to overcome hurdles in their development, mainly related to the danger of becoming trapped in legal tangles.
Former state-owned enterprises minister Dahlan Iskan was named a corruption suspect this month for his alleged role in rigging the procurement of electricity transformers worth more than Rp 1.3 trillion when serving as president director of PLN in 2009.
'There have been many cases involving colleagues in PLN that have led [officials] to be extremely cautious, thus risking the speed [of the projects' development],' acknowledged Sudirman.
At least 10,000 MW ' the first phase of construction ' will be supervised by PLN. Total investment in the power plants and their supporting electricity infrastructure is estimated at Rp 200 trillion, shared between PLN and independent power producers (IPPs).
However, while Jokowi expressed his desire for the power plant projects to be completed speedily, he warned officials not to neglect principles of good governance and transparency.
'According to the President, in principle there must be a degree of trust between government officials and law enforcers in every phase of the development,' said Teten. 'If someone deliberately commits a transgression, then legal action must be taken.'
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Action plans to accelerate construction of power plants to generate 35,000 MW.
The government aims to issue the following regulations by the third quarter this year.
1. Presidential regulation on procurement of generators, transmissions and transformers to allow direct appointment of vendors.
2. Revision to Industry Minister Regulation No. 54/2014 on local content to increase the use of locally made equipment.
3. Presidential regulation on improving the financial health of state power firm PLN. The government will inject more capital into the company.
4. Presidential regulation on direct lending to allow speedier loan channeling from the government.
5. Presidential regulation on primary energy to enforce domestic market obligations and assure coal and gas supplies for power plants.
6. Presidential regulation on legal certainty to strengthen Law No. 2/2012 on land procurement and other regulations on licensing.
7. Presidential issue on the obligation for local administrations to support the projects. This will require local administrations to play a greater role in leading land procurement processes and licensing.
Source: Energy and Mineral Resources Ministry
