Indonesia must restart energy projects to avoid power crisis

6 Feb 2002 – The government of Indonesia must resurrect power projects shelved during the 1997 financial crisis if it is to head off a looming electricity shortage forecast for 2004, according to a leading energy official.

Luluk Samiarso, director general for electricity and energy utilization said yesterday that a number of new long term agreements had been signed but he feared that, unless new power generating plants were operational by 2004, Indonesia would suffer a severe shortage. “We could prevent this electricity crisis if the projects are developed,” said Luluk .

His view was echoed by Eddie Widiono, president director of state-owned electricity company Perusahaan Listrik Negara (PLN), who said Indonesia needs 18 800 MW of additional power capacity in ten years time, 15 000 MW of which would be needed by the Java-Bali power system, the country’s main grid. He said the overall investment required up to 2005 at 99 trillion rupiah ($900m).

The Indonesian government has sought to settle disputes with independent power producers and renegotiate a number of old contracts , which were allegedly tarnished with corruption and collusion. The decline in the value of the Indonesian currency against the US dollar has left the national utility company PLN with series of PPAs under which they are obliged to buy power at far more than rate charged to consumers.

PPAs signed under the old regime are suspected of having included large mark-ups to the benefit of investors and government officials. However, as Chief Economics Minister Dorodjatun Kuntjoro Jakti said, it was difficult to prove corruption in the projects and there is little chance the government will win any case if the disputes were to be brought to court.

“I am angry if I look behind, but if we look ahead we will see the terrible crisis we are facing,” Dorodjatun said. The government, therefore, aware of the crisis in 2004, has to be more flexible in seeking to settle the dispute, he added.

The country’s parliament is currently reviewing the draft of new electricity bill, which is expected to be ready in April. The aim of the bill is to strengthen the regulatory and legal framework for investors.

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