POWER October 2014 - 50

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Black & Veatch helped deliver Tanjung Jati B Units 3 & 4, located near Jepara, Central Java, Indonesia.
The plant is owned by Sumitomo Corporation and subsidiary PT Central Java Power, and is operated
by PT PLN (Persero), Indonesia's state-owned power utility. Photo courtesy of Black & Veatch.
population; boost generation capacities to
keep up with a staggering energy demand
increase of 7.4% per year; and alter the current
energy mix to ensure energy security
for the nation's future. Failure to achieve
these goals could compromise the country's
ability to continue to lift millions out
of poverty and compete on both a regional
and global level.
Ambitious Plans,
but Eficacy Mixed
As Kishore Dass, the president director
of Pöyry Indonesia, the global Finish consulting
and engineering irm, said: " Power
shortages are endemic in Indonesia.
The country's total electricity generation
touched 47 GW as of the end of last year.
According to PLN's electricity procurement
plan for the 2013 -2022 period, there needs
to be an additional capacity of 31.5 GW for
the Java-Bali grid. This amounts to about
3.2 GW per year. At the national level the
power requirement translates to around 6
GW per year. "
Increasing the national generating capacity
to 60 GW by 2022, as the Governmentowned
Perusahaan Listrik Negara (PLN),
which has a monopoly on electricity distribution
and accounts for 80% of the country's
generation capacity, has forecasted, is
no small feat. While the Government has
done well by enacting regulation in 2009
for renewable power projects of 10 MW
that stipulates feed-in tariffs for investors
and that assigns to the PLN the obligation
to buy this power, the Government understands
that it must encourage projects of
a larger scale. To help achieve such a signiicant
increase in power generation, in
2006, the Government introduced the fasttrack
program (FTPI) mandating the PLN to
build 10,000 MW coal-ired power plants
by 2011, a deadline that was later extended
2
Global Business Reports // POWER INDONESIA
to 2014. In 2010, the government launched
a second 10,000 MW fast-track program
(FTPII), aimed at encouraging investment
from Independent Power Producers (IPPs),
which sell electricity to the PLN, and separately
the development of renewable energy,
focusing on geothermal and hydro
power. The FTPII program was initially to
be completed in 2014, but that target date
has been pushed back until 2020.
To realize the construction and commissioning
of the power plants under FTPI and
FTPII and additional power plants that do
not fall within the purview of these programs,
the government has turned to the
private sector, particularly toward foreign
investors.
Although
recent regulations,
bred from nationalist sentiment, negatively
affect foreign investors' interests in other
segments of the economy, the current regulatory
structure for the power industry is
very favorable, as Guy Des Rosiers, senior
foreign legal consultant at the Indonesian
law irm MAKARIM & TAIRA S., noted:
" Overall, the current environment for foreign
investors is positive thanks to a legal
framework that allows bankable projects
to come to the market, and a generally favorable
attitude from PLN and relevant government
stakeholders, all of whom share
a strong incentive to ensure the smooth
development of future power projects. "
L. David Rimbo, managing partner within
the Transaction Advisory Services group at
Ernst & Young Indonesia, explained: " Within
the last ive to six years, there is greater
understanding about the prescribed investment
structure and operational set-up of
an IPP project in Indonesia under the PPA
scheme, primarily under a BOO (BuildOperate-Own)
arrangement. With such a
scheme, the returns will continue to accrue
to the asset owners beyond the tenure of
the initial PPA, with a renewal or extension
October 2014
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POWER October 2014

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