Indonesia is tendering to build 12 gigawatts of electricity generating capacity as the final plank in Jakarta's plan to increase the country's power sector capacity by 35 GW by 2019, sources said at the 23rd Coaltrans Asia Conference in Bali this week.
"Out of 35 GW, we are likely to close tenders for 11.7-11.8 GW by the end of the year," said Harlen En, head of the coal division at PLN (Persero) at the conference on Monday.
Tendering process takes a lot of time, as does financial closure, Harlen said, adding it takes at least three-four years to commission a power plant. Harlen said PLN has long-term contracts with the some of the major miners, like Adaro, Kideco, Berau Coal, and Kaltim Prima Coal, until 2025.
Moreover, to support both the success of the 35 GW project and to secure coal supply, PLN intends to partner in mine-mouth coal projects, Harlen said.
According to market sources, around 60% of the 35 GW project's generating capacity will be fueled by coal. The move is likely to see a spark increase in domestic demand for Indonesian thermal coal, sources said.
M. Arsajad Rasjid P.M., CEO of Indika Energy, said, the 35 GW power project would result in extra coal demand of around 110 million-120 million mt and progressively 140 million-150 million mt.
Indonesia intends to raise its share of domestic thermal coal production to around 60% by 2019 from 22% in 2017, said Satry Nuguraha from the Ministry of Energy and Mineral Resources on Monday.
THE ROADBLOCKS
Land issues have been deterring the progress of the project, said Dharma Djojonegoro, deputy CEO at Adaro power, on Tuesday.
"Various regulation licenses and permits have to be synced in, so it takes a lot of patience to do that. It took us about three-four years to sort land issues and the change in the transaction currency to Indonesian Rupiah was also a setback. Then we had to deal with the land zoning issue too, which took us around six months," Djojonegoro added.
"The cost factor is also very important," Harlen said, adding the pricing for the project should be "comfortable" for both suppliers and PLN.
Given the current volatility in energy prices, he added they intend to discuss with the government to peg a floor and a celling price.
