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September 7, 2008

Japanese firm to invest $1.5 billion in Indonesia’s power plant
Sumitomo Corporation, a Japan-based diversified business giant, may spend up to $1.5 billion to build two additional generators at Tanjung Jati B coal-fired power plant in Jepara, Central Java, reported local newspaper the Jakarta Post.

The daily quoted J Purwono, director general for electricity and energy usage at the Energy and Mineral Resources Ministry, as saying Friday that Sumitomo would build two generator units with a combined capacity of 1320 megawatts (MW) to augment the existing generators at the plant, which also push out a combined 1320 MW.

"The construction is to start in early 2009. Three years later the new units will go on-line," he said after a meeting with Sumitomo representatives, who were unavailable for comment.

Purwono said Sumitomo had received approval from the State Ministry for State Enterprises to employ the services of an independent power producer (IPP) and that it was awaiting final approval from the energy and mineral resources minister.

Purwono said Sumitomo would seek financial support for the project mostly from the Japan Bank for International Cooperation (JBIC).

"The total investment will be between $1.2 billion and $1.5 billion. The largest investment will come from JBIC. Sumitomo is still finalizing the financial scheme for this project. Local banks are invited to join if they are interested."

Purnomo said Sumitomo had promised to finalize the scheme by the end of the year.

The purchase agreement between PT Central Java Power, a subsidiary of Sumitomo that is operating the power plant, and state power firm PT PLN, as the sole power distributor for households and most businesses, will be signed next week.

Under the agreement, PLN will buy electricity from Sumitomo's power plant for 23 years.

Purwono said PT Central Java Power had agreed to sell electricity from the plant to PLN at a price of 4.3 US cents per kilowatt per hour (kWh).

"This is a competitive price," he added.

PLN vice president Rudiantara said the company was still discussing the terms and conditions of the agreement with Sumitomo.

Currently, PLN buys electricity buys electricity from the plant at between 4 and 5 US cents per kWh -- not including fuel prices, he said.

The expansion of Tanjung Jati B power plant will support the government's second 10,000 MW electricity program, which will commence in 2011.

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