From Indonesia Today

Muara Enim power project: Chicken-and-egg situation

Reporters from major newspapers covering president Susilo Bambang Yudhoyono's visit to Shanghai, China wrote that China Huadian has eventually entered into a JV agreement with Indonesian partners to build the US$2.1 billion coal-fired power plant in Muara Enim, South Sumatra. A significant step forward, but the project is still in a chicken-and-egg situation.

Why? Because the 2,400 MW power plant would only sensible to be built if state-owned electricity PT Perusahaan Listrik Negara (PLN) also start to install Sumatra-Java power grid. So far, we never heard of PLN's plan.

Actually, early this month, director general for electricity, J Purwono, rejected US investor's plan to build 1,200 MW coal-fired power plant in Musi Rawas, South Sumatra arguing it's too big-too dangerous. The investor, AES Asia & Middle East would work with Japan's Sojitz and local partner, to build the power plant.

Mr Purwono was quoted by saying Sumatra is not suitable for power plants with generating capacity of more than 600 MW. "Sumatra only good for 100-200 MW capacity, " he said. (Strange if we consider the regular blackouts in the island)

I would say the real reason behind the rejection is not the size of the power plants, but the availability of reliable power grid linking Sumatra and Java. By law, only PLN is allowed to operate electricity transmission & distribution in the country.
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