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Stunted projects may lead to losses
The government’s plan to boost the country’s electricity procurement capacity may be hampered by power plant projects, as progress on that front has been stunted for more than seven years, leading to potential state losses and speed bumps in future projects
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The government’s plan to boost the country’s electricity procurement capacity may be hampered by power plant projects, as progress on that front has been stunted for more than seven years, leading to potential state losses and speed bumps in future projects.
The State Palace held a press conference on Friday concerning 34 troubled electricity projects, which are parts of 7,000 megawatt (MW) carryover projects from the administration of former president Susilo Bambang Yudhoyono, known as FTP I and II.
The stunted projects make up about 600 MW and are comprised mainly of coal-fired power plants with several mini power plants also included in the projects.
Of the 34 stalled projects, 12 projects worth Rp 3.76 trillion (US$286.96 million) must be terminated, following an evaluation from Finance and Development Supervisory Agency (BPKP).
“There are huge potential losses,” Cabinet Secretary Pramono Anung said, without detailing the potential losses.
The remaining 22 projects could be resumed, but will require additional costs of Rp 11.93 trillion.
“Disbursement of additional funds will, of course, need consent from the government, in this case, the President, the Vice President and related minister,” Pramono said, adding that President Joko “Jokowi” Widodo had instructed related officials to immediately seek out the best solutions.
This is not the first time news of the stunted projects has surfaced.
Last month, state electricity firm Perusahaan Listrik Negara (PLN) reported to the House of Representatives’ Commission VII — which manages the energy sector — that it planned to terminate 13 of the 34 projects and develop transmission lines in place of the power plants as this was more economically feasible.
However, PLN president director Sofyan Basir confirmed recently that only 12 projects would be terminated and that PLN had already found solutions to continue 10 of the 22 projects.
“There are still 12 projects for which we haven’t found operational and financial solutions. We need to figure out how to continue the projects with new funds,” he said.
The FTP I and II projects may be burdensome for PLN, which is also juggling Jokowi’s ambitious 35,000 MW electricity procurement program.
The program is expected to raise the country’s electrification rate to 97 percent in 2019 from 88.3 percent at present but still lower than Brunei, Malaysia, Singapore and Thailand’s 99 to 100 percent rates.
As of September, data from PLN shows that only 232 MW of the total 35,000 MW project is in commercial operation.
Coordinating Maritime Affairs Minister Luhut Pandjaitan said in August that only 23,000 MW to 25,000 MW of the project would be reached by 2019 but several officials have said it could be far lower than that.
Energy and Mineral Resources deputy minister Arcandra Tahar declined to comment on the issue on Friday.
Institute for Essential Services Reform (IESR) executive director Fabby Tumiwa said that one of the problems that paused some of the 34 projects was the sudden rise in prices between the time of the auction and the planned execution.
Fabby said that it would be best for the government and PLN to follow any recommendations offered by the BPKP. However, he recommended that the 12 to be terminated projects should be put back into PLN’s electricity procurement business plan (RUPTL), re-auctioned and resumed later.
Furthermore, any projects with independent power producers (IPP) that are currently being renegotiated should also be terminated and auctioned off again.
