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APBI proposes ‘cost-plus’ coal pricing for 35,000 MW project
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APBI chairman Pandu Sjahrir (left) gives a statement at a press conference on Thursday. The association has proposed a “cost-plus” coal price formula in a bid to settle a lengthy disagreement over the selling price of fuel for the 35,000 megawatt electrification project. (thejakartapost.com/Anton Hermansyah)
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he Indonesian Coal Mining Association (APBI) has proposed a “cost-plus” coal price formula in a bid to settle a lengthy disagreement over the selling price of the fuel for the government's 35,000 megawatt (MW) electrification project.
The cost-plus scheme means the coal price would include the stripping cost, plus a 15 to 25 percent margin. Currently the stripping cost is around US$20 to $40 per metric ton while the coal benchmark price (HBA) is around $52.
"If the government accepts the cost-plus formula, we promise to prioritize coal for domestic use, and the rest for exports. Otherwise, we are fine with any price but there will be no priority for domestic use," APBI chairman Pandu Sjahrir told thejakartapost.com on Thursday.
He argued that the cost-plus formula would provide a stable margin for coal miners in a long-term contract. Without a proper margin, coal miners would be reluctant to produce, while coal-fueled power plants need continuous long-term supply.
Meanwhile, the stripping cost was included as coal miners would have to dig deeper to produce more coal, which resulted in bigger stripping costs over time, Pandu explained.
Amid the delay in the coal price agreement, the government in July 2015 reduced the share of coal-based power plants in the 35,000 MW project from 60 percent to 50 percent, and increased the portion of renewable energy to 25 percent.
"If you want to do all the electrification with renewable energy, please do. But you will face costs seven to eight times higher than with coal. We are also aware of external issues like the COP Paris, but once again this is the cheapest option," Pandu said.
Even in developed countries, he added, the use of coal remained around 40 to 50 percent.
According to a study conducted by Price Waterhouse Coopers, Indonesia’s coal reserves will be depleted by 2033. Adding to the problem, there are 3,982 mining licenses (IUPs) with unclean or unclear status, of which 1,087 are allegedly linked to tax evaders. (ags)
