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PLN to focus on transmission following power plant reduction

The government has eased the financial burden of state-owned electricity firm PLN by halving the number of power plants it has to build and releasing part of the transmission development to private players

Raras Cahyafitri (The Jakarta Post)
Jakarta
Wed, July 29, 2015

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PLN to focus on transmission following power plant reduction

T

he government has eased the financial burden of state-owned electricity firm PLN by halving the number of power plants it has to build and releasing part of the transmission development to private players.

PLN, which is overwhelmed with numerous power plant projects, will only have to develop power plants generating 5,000 megawatts (MW) out of the government'€™s ambitious electricity program of producing 35,000 MW within five years.

The company'€™s share in the project is lower than the previously planned 10,000 MW.

He said that under the new disposition, PLN would be able to focus on electricity transmission projects, which are also frequently hampered by various issues from land acquisition to financing.

'€œIt is aimed for each party to be focused. Moreover, it is normal that development of short-term projects [power plants] is centered around the role of the private sector,'€ said Energy and Mieral Resources Minister Sudirman Said.

Given the new proportion, independent power producers will have a larger share of the power plant development, up to 30,000 MW.

PLN previously revealed that the development of 35,000 MW power plants, which consist of various energy sources from coal to hydro, would need a total investment of Rp 814 trillion (US$60 billion).

Under the previous sharing of development, private sector projects generating 25,094 MW will cost Rp 615 trillion while PLN'€™s 10,681-MW projects will require Rp 199 trillion in investment.

PLN director Amin Subekti said the government'€™s policy to reduce PLN'€™s share to 5,000 MW would ease the company'€™s financial burden for the power plant projects.

'€œIt will at least reduce our financing burden to $10 billion,'€ he said.

PLN is currently the biggest player in electricity industry. It has 54 million customers and operates 70 percent of the power-plant capacity in the country.

As electricity consumption is expected to grow by around 7 percent to support economic growth, the country needs more power plants. However, PLN is constrained when it comes to financing all developments.

Meanwhile, the private sector, once regarded as the fast track to electricity development, has not had an entirely successful record in the development of power plants in previous projects.

Many projects under the fast-track programs have yet to be finished.

The Energy and Mineral Resources Ministry'€™s director general for electricity, Jarman, said he was optimistic that private players who would be involved in the 35,000-MW program would be qualified so that previous failures would not recur.

'€œIn the past, private players were chosen based on the lowest bid. Now, we conduct due diligence to examine their financial and technical ability. Those who don'€™t meet the requirements will have been eliminated from the beginning,'€ he said.

Apart from giving more projects to private power producers, the government will also welcome other players in the development of the electricity transmission network to support the 35,000-MW power plants.

Under previous calculations, the development of the transmission network and main stations to connect all the power plant projects into the distribution system would need Rp 313 trillion in investment.

Details of the sharing of transmission development have yet to be determined, PLN'€™s Amin said.

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