ASEAN KEY DESTINATIONS
Power line to require higher local content
Indonesia:The Energy and Mineral Resources Ministry will ask state-owned electricity firm PLN to use more locally produced material for its power transmission line.
The request has been put on the table after the government turned down an option to allow private players to take part in the development of a 47,000-kilometer transmission network, according to the ministry’s director general for electricity, Jarman.
“According to the latest discussion, PLN will work on all 47,000 km of the transmission line. However, we will use a different approach in which local companies have to be involved. For example, the steel required will be supplied by [state-owned steelmaker] Krakatau Steel,” he said.
The government had previously planned to open more opportunities to private players to take part in the development of 35,000 megawatt (MW) power plants along with the transmission networks. The move is aimed at reducing the burden on PLN, particularly the financial burden as a consequence of the massive projects. According to recent reports, PLN will only be required to develop 5,000 MW power plants from previously 10,000 MW in the 35,000 MW projects, whose total investment is estimated at Rp 814 trillion.
PLN would now only need to invest half the previous estimation or around Rp 100 trillion, the company’s director, Amin Subekti, said earlier. For the transmission network, the 47,000-km line will need total investment of Rp 313 trillion.
Jarman cited that in the previous development of transmission networks, local content had reached around 80 percent. “However, we expect that the level can be increased because the capacity of domestic companies has improved,” he said.
The government is struggling to realize its ambitious plan of developing an additional 35,000 MW within five years, along with its transmission line. Critics have doubted the realization of the plan partly because previous similar projects, the two phases of 10,000 MW electricity fast track programs, have yet to be finished.
Various reasons have hampered the electricity projects, ranging from land acquisition to the poor financial ability of private players that have won tenders to develop numerous power plants.
The Energy and Mineral Resources Ministry has argued that it will be able to speed up land acquisition for its power plants on the implementation of the new land acquisition law — which allows the authorities to force people to sell their property for public infrastructure projects, with fair compensation.
The ministry also welcomes a new ruling that requires a comprehensive due diligence study to be carried out on independent power producers to ensure that the producers have sufficient capabilities to realize the planned projects.
Meanwhile, Institute for Essential Service Reform (IESR) executive director Fabby Tumiwa said the law and regulation would support the execution of electricity projects. However, better planning and financing as well as PLN’s leadership would be necessary, he said.
“PLN has said that it only needs to sign several power purchase agreements. It has to be determined to take risks and not keep them pending due to regulations,” Fabby said.
The power firm said earlier that it targeted to sign power purchase agreements for around 10,000 MW plants under the 35,000 MW program developed by independent power producers before year-end. Apart from technical and financial matters, critics have also raised concerns over PLN’s ability to execute power projects amid corruption cases. - See more at: http://www.thejakartapost.com/news/2015/08/10/power-line-require-higher-local-content.html#sthash.o6rlEFaG.dpuf
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