Asia, Coal Fired, New Projects

$4bn coal-fired power plant in jeopardy in Indonesia

Coal power plant

The Indonesian-Japanese consortium behind what would be one of Southeast Asia’s biggest coal-fired power plants has declared force majeure over the construction of the facility.

Strong local opposition has forced the move, although PT Bhimasena Power Indonesia say they will continue to seek avenues to getting the 2000 MW coal project off the ground.

Force majeure is a common clause in contracts that essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as a war, strike, riot, crime, or an event described by the legal term act of God prevents one or both parties from fulfilling their obligations under the contract. In practice, most force majeure clauses do not excuse a party’s non-performance entirely, but only suspend it for the duration of the force majeure.
Coal power plant
The company – set up specifically to develop the central Java investment – cited the “unstable situation at the location” as the reason behind the declaration.

The company, according to its press statement, “has taken all reasonable precautions, due care and reasonable alternative measures to avoid the effect of such circumstances.”

The situation, the company said, is “beyond the control” of the consortium and “may only be able to be solved by the [Indonesian] government’s support.”

The plant is designed to supply electricity to 13 million people in Central Java Province, and has been promoted by a Japanese consortium formed by the Japanese government-linked Electric Power Development Co and Japanese trading house Itochu Corp.

Construction was meant to begin in 2012 and the plant is supposed to be operational by 2016. However, land acquisition for the project located in Batang Regency, initially scheduled to be completed by October 2012, has been delayed due to local villagers’ opposition over concerns about its environmental impact.

The company claims it has acquired more than 85 per cent of the land at the site and has also received an approval of its environmental impact assessment as well as other necessary permits.

In a statement the company said it “will seek further assistance from the government of Indonesia to resolve the situation as soon as possible.”

For more coal-fired power generation news