US$4 billion Indonesian power project moves forward

14 June 2016, Week 23, Issue 361

After repeated delays, the controversial US$4 billion Japan-led project to build one of Asia’s largest coal-fired power plants in Indonesia has made significant progress, clearing major legal and financial hurdles. Welcoming these recent developments last week, Indonesian President Joko Widodo expressed his firm determination to push ahead with the long-stalled project as part of his ambitious energy policy.

The Joko administration has set a target of raising the Southeast Asian country’s power generation capacity by some 35 GW by 2019 to meet rising demand amid economic growth. Project developer Bhimasena Power Indonesia (BPI) will build and operate a 2,000-MW coal-fired power plant in Batang regency, Central Java Province.

Indonesian state-owned electric utility Perusahaan Listrik Negara (PLN) signed a contract in October 2011 to purchase the electricity generated at the Central Java Power Plant (CJPP) over 25 years. Adaro Energy, a major Indonesian coal miner, holds a 34% stake in BPI through its wholly owned subsidiary, Adaro Power. Japan’s Electric Power Development, commonly called J-Power, and Itochu also own stakes in BPI of 34% and 32% respectively.

The new plant will consist of two 1,000-MW units. Under the consortium’s original plan, the first unit would have started commercial operations at the end of 2016, followed by the second one in the middle of 2017. The CJPP project has been delayed repeatedly owing to strong objections from dozens of local landowners, who have refused to give up their paddy fields for the new power plant.

But earlier this year, Indonesia’s Supreme Court rejected their appeal in the land-acquisition dispute, paving the way for the government to take over the remaining land for the project. Earlier this month, BPI also signed a loan agreement worth US$3.4 billion with a group of 10 financial organisations, including the Japan Bank for International Co-operation (JBIC) and seven other Japanese lenders, for the CJPP project.

After clearing major legal and financial hurdles, the first unit of the CJPP is now expected to start commercial operations in June 2020, followed by the second one in December 2020, according to J-Power.

Edited by

Richard Lockhart

Editor

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