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Jakarta Post

Bad precedent set for govt’s new power project

Twenty percent of the previous administration’s mega power plant projects have failed to come online, a bad precedent for President Joko “Jokowi” Widodo’s realization of his 35,000 megawatt (MW) electricity procurement program

Fedina S. Sundaryani (The Jakarta Post)
Jakarta
Wed, June 1, 2016

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Bad precedent set for govt’s  new power project

Twenty percent of the previous administration’s mega power plant projects have failed to come online, a bad precedent for President Joko “Jokowi” Widodo’s realization of his 35,000 megawatt (MW) electricity procurement program.

Only 80 percent of the 10,000 MW project that came to an end in 2014, at the close of the tenure of former president Susilo Bambang Yudhoyono and Vice President Jusuf Kalla, has been reached, according to a recent finding by the Supreme Audit Agency (BPK).

As many as 166 contracts worth up to Rp 6.5 trillion (US$476 million) and representing 2,424 MW of power are at a standstill due to various legal problems. The second 10,000 MW project launched not long after has yielded even worse results.

Most of the issues that have hindered the ambitious power plant projects are land acquisition problems, poor planning and contractors working beyond their capacity, according to the BPK.

BPK IV member Rizal Djalil said on Tuesday that the problematic contracts may lead to state losses as existing power plants operated by independent power producers use a take or pay method.

“PLN will have to pay even though electricity from those power plants cannot be transmitted to customers as the deposit that has yet to be returned totals Rp 554 billion,” he said at a press briefing in Jakarta on Tuesday.

Under the Jokowi administration, Vice President Kalla has set an even more ambitious plan of 35,000 MW by 2019, a tripling of the previous project targets, to increase electricity supply in Southeast Asia’s largest economy, which remains lower than any of its regional peers.

The electrification rate is expected to rise to 97 percent in 2019 from 88.3 percent at present, lower than neighbors Singapore, Brunei, Thailand and Malaysia’s 99 to 100 percent rates.

State electricity company PLN, which is working on some of the power plant projects, is currently juggling many projects.

Other than the failed projects of the first 10,000 MW project called FTP-1, there are also 1,550 MW worth of projects incomplete in the follow-up FTP-2 project and 3,437 MW from the company’s own program, totaling 7,000 MW of projects. For the majority of the contracts that were put on hold in the FTP-1, PLN will escalate efforts to complete the projects.

However, eight contracts hindered by financial, legal and land acquisition problems will be taken to court or exterminated.

“We will take two contracts to court, while terminating and concluding the remaining six contracts,” said PLN director for corporate planning Nicke Widyawati.

Coordinating Maritime Affairs Minister Rizal Ramli has repeatedly said that the 35,000 MW goal was too high and 18,000 MW was a more realistic target.

However, Nicke said that PLN had upped its efforts to ensure that the 35,000 MW target would be achieved by the deadline. Power purchasing agreements (PPA), which have previously taken up to five years, have been sped up to take up only seven to eight months, he added.

Up to 22 percent have started construction, with 26 percent in the middle of the land-acquisition processes. Only 23 percent are yet to be put to tender. “Most of them are gas, which can be completed within two years,” she said.

Meanwhile, Energy and Mineral Resources Ministry director general for electricity, Jarman, said that the government had made efforts to speed up the process by issuing several regulations and removing some regulations in relation to land acquisition and permit applications.

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