VP says government will provide guarantees for new power plants

Tony Hotland, The Jakarta Post, Jakarta

Vice President M. Jusuf Kalla gave assurances Friday that the government would provide guarantees to investors in new power plants if state electricity firm Perusahaan Listrik Negara (PLN) found itself unable to purchase electricity from them.

"The President has signed a decree that will allow the finance minister to give guarantees covering the possibility that PLN might not be able to fulfill its obligations," Kalla said.

The government is offering a number of projects for the construction of coal-fired power plants as part its fast-track program to provide additional power supplies of about 10,000 megawatts (MW) within the next three years.

A number of investors from China, Japan and several European countries have passed the pre-qualification stage and can now submit bids for the construction of the power plants.

But many bidders have pulled out of the tender due to the lack of a government guarantee.

However, Kalla said it would be unlikely that PLN would face any difficulties in meeting its obligation to buy the electricity from the new power plants.

"I'm sure PLN will not have to use the government's guarantee, as it will be paying much less for the power from the coal-fired plants than it would for power from existing plants, which are mostly oil or gas-fired," he said.

The construction of the new power plants should help reduce power generation costs by up to Rp 35 trillion (about US$3.6 billion) a year.

The Vice President also defended the direct appointment of some firms as part of the program due to the small number of investors submitting bids.

"In some of the projects, there are only two investors. So we held a sort of beauty contest to see which one met our requirements the best. Everyone has a chance as long as the prices on offer suit us," he said.

President Susilo Bambang Yudhoyono has exempted the state utility from a rule requiring open bidding for power projects in an attempt to accelerate the process.

The new rule, signed July 5, will remain in effect until the end of 2009, when the new power projects are scheduled for completion. The President has just signed a decree that will allow the Finance Ministry to implement the rule, Kalla said.

One of the directly appointed contractors is infrastructure firm PT Bosowa Energi, which has won a project for a 200 MW power plant in Jeneponto, South Sulawesi.

Bosowa Energi is a unit of the Bosowa Group, which was founded by Aksa Mahmud, a deputy speaker of the People's Consultative Assembly and the brother-in-law of the Vice President.
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