D

ue to a lengthy land clearance process, the full-scale development of the controversial Batang power plant in Central Java is facing further delays, which has pushed the developer to seek an extension for the project'€™s financial closure.

The full-scale construction of the 2 x 1,000 megawatt (MW) coal-fired power plant, touted to be the largest in Southeast Asia, is still pending the clearance of around 12 hectares of land, according to state-owned electricity firm PLN.

PLN is now in charge of the land clearance process for the power plant following the implementation of the Land Acquisition Law.

'€œPLN has stepped in to work on the land acquisition. We are in coordination with BPI [Bhimasena Power Indonesia] and BPN [the National Land Agency]. BPI has asked for an extension of the financial closure period by six months,'€ PLN director Murtaqi Syamsuddin said.

BPI is a consortium consisting of Jakarta-listed PT Adaro Energy, J-Power Electric Power Development Co. Ltd. and Itochu Corp., which won the tender for the Batang project in 2011.

The power plant is the first project to be developed under a public-private partnership scheme. Due to the protracted land acquisition, BPI proposed last year an extension for the financial closure period of one year. The deadline was this October.

As the consortium is asking for a new extension, the deadline for financial closure '€” which marks that all conditions for financial agreements have been fulfilled '€” is now set for March next year.

The project is estimated to cost US$4 billion and the electricity produced will be sold to PLN under a 25-year contract. The first stage of commercial operations was initially scheduled for 2016. However, the target became unfeasible partly after BPI in mid-2014 declared force majeure regarding the project as it was unable to acquire the remaining plots of land needed.

Earlier this year, the government assigned PLN to step in and enforce Law No. 2/2012 on land acquisition. Under the law, the government has the authority to seize people'€™s land in the name of public interests.

The law also opens up the settlement of any disagreements regarding land acquisition to occur in court. Developers will deposit an amount of money based on the land'€™s value with the court as compensation for residents disagreeing with the acquisition.

The legal process is currently underway as a number of residents have continued to decline to release their land.

In August this year, President Joko '€œJokowi'€ Widodo led a ceremony to mark the start of the Batang power plant development, which is crucial to help prevent Java from experiencing an electricity crisis.

The president gave a one-month deadline for the settlement of the land acquisition dispute. Central Java Governor Ganjar Pranowo, Jokowi'€™s colleague in the ruling Indonesian Democratic Party of Struggle (PDI-P), said earlier that he would propose more generous compensation for the landowners, but did not specify the details of the new scheme.

The corporate secretary of Adaro Energy, one of BPI'€™s shareholders, Mahardika Putranto, said the company remained hopeful about the project.

'€œThe land acquisition process continues. We remain hopeful to soon achieve financial closure,'€ he said.