T

he government has agreed to guarantee geothermal development as part of its fast track program to respond to a looming national power shortage.

Vice President Boediono said in Jakarta on Tuesday that Finance Minister Agus Martowardojo had signed a ministerial decree assuring that state electricity company PT PLN could pay for electricity from independent producers, including geothermal power plants.

He expected the decree to assuage geothermal investors’ anxiety about PLN’s ability to fulfill all the financial obligations that were stipulated in the power purchase agreements (PPA).

The decree stated that geothermal producers would receive letters guaranteeing that PLN would be able to fulfill its obligations, he added.

“Investors have been waiting for this decree for quite some time. They have very strong interests in developing geothermal energy to generate electricity in Indonesia,” the Vice President said in a press statement on his office’s official website.

The decree also says the government’s guarantee will expire if, in 48 months, investors cannot get financial backing to fund the projects.

Boediono said the government would disseminate the content of the decree to all the geothermal producers in the country.

Separately, Indonesian Geothermal Association chairman Abadi Poernomo said he had not seen the new decree so he could not comment on it. However, he also said he hoped that the decree would satisfy investors.

“If the content of the decree is not in line with investors’ aspirations, I’m afraid many geothermal projects will stall because we’ll find great difficulties in acquiring financial backing,” he told reporters in a telephone interview.

The power, mining and downstream chief operating officer of Medco Power Indonesia, Budi Basuki, agreed with Abadi’s sentiment that the government guarantee would help investors get funding for their projects from financial institutions.

PLN reported earlier that, besides certainty of PLN’s ability to meet its financial obligations, the geothermal producer also requested that the government provide compensation if the geothermal projects were stopped due to future political or legal changes.

Due to uncertainties over the government’s guarantee, many investors declined to sign the PPA. Supreme Energy, for instance, would not sign PPAs for the Gunung Rajabasa and Muara Laboh geothermal fields in Lampung and West Sumatra.

PLN also has not signed its power purchase agreement with the Bakrie Group, the operator of the Sukoria geothermal field in East Nusa Tenggara.

The Directorate General for New Renewable Energy and Energy Conservation at the Energy and Mineral Resources Ministry announced in a press statement that the development projects of 43 geothermal power plants with a total capacity of 2,170 megawatts would be ready to begin in the near future.

The projects are part of the second phase of the government’s 10,000-megawatt fast track program to stave off a looming national power deficit.