Marubeni, Sojitz risk losing Java 1 contract

24 January 2017, Week 03, Issue 391

Japan’s Marubeni and Sojitz corporations, the participants in the winning consortium for Indonesia’s biggest-ever power plant, the 1,600-MW Java 1 TPP, face losing the project in a contractual dispute.

The project was awarded to a consortium of Marubeni, Sojitz and Indonesia’s state-owned Pertamina in October 2016 following a competitive bid.

However, a final agreement has not yet been signed and the contract overseer, state power company PLN, gave the consortium until this week to complete or lose the contract, Jakarta analysts Katadata said in a report.

The US$2 billion Java 1 is a gas-fired TPP located at Bekasi on the eastern fringe of Jakarta. It is intended that the gas will be supplied via a floating storage and regasification unit (FSRU) yet to be built. The unit will source gas from the Tangguh offshore field in eastern Indonesia, Katadata said.

The contract had not been signed because the consortium was “not able to meet some of the requirements of the project,” Katadata said quoting PLN’s procurement director, Iwan Santoso.

Katadata said problems included loan financing from banks and uncertainty about the supply of gas. The terms of the agreement required the consortium also to build the FSRU, Katadata said.

It quoted PLN’s Iwan as saying if the contract was not signed in the week beginning January 23 then the project would be re-tendered.

The rival bidder in the final stages of the auction last year for Java 1 was a consortium of Indonesian coal and power business Adaro Energy, Mitsubishi of Japan and two other Indonesian companies, The Globe said. Katadata quoted PLN’s Iwan saying if the agreement is not signed the project will be re-tendered.

Java 1 is part of Indonesian President Joko Widodo’s grand plan to add 35,000 MW of new capacity in the country by the end of 2019, but progress has been slow.

The National Energy Board this week has forecast that the power expansion programme will now only be completed in 2021 as long as “everything goes well,” the Jakarta Post said.

“The latest data from PLN shows that only seven power plants with a total capacity of 4,580 MW reached financial closure throughout last year,” the Post said.

Edited by

Richard Lockhart

Editor

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