Regulation blamed for delay in Indonesian power plant construction

5 February 2003 – Japan’s Sumitomo Corp has postponed the completion of Indonesia’s Tanjung Jati B gas steam powered electricity plant over a government regulation on counter trade system.

Eddie Widiono, the president of the Indonesian state electricity utility PLN, said most of the components for the plant are imported from Japan and under a government regulation components are imported under counter trade system. The regulation is imposed by the industry and trade ministry as the $1.4bn project is to be financed under a leasing agreement between Sumitomo and PLN., Eddie said. “Sumitomo is confused by the regulation and it has no idea about which of the components that have to be imported under counter trade system,” he said.

The 2×660 MW plant is to be completed in 2004 to supply power to the Java-Bali interconnection. Sumitomo has set a new schedule to compete the project in 2006, Eddie said, adding the consequence of the delay will be shortage of 600 MW in power supply in 2004 and 900 MW in 2005. “If Sumitomo fails to finish the project in 2006, I don’t’ know how many areas would have blackout,” he said.

The project was part of the 27 power projects signed by PLN in the 1990s, but the economic crisis, which struck the country in 1997, forced the government to postpone most of them.

In order to boost investment and infrastructure projects, as well as to avoid an imminent power crisis in 2004 and 2005, the government ordered last year that the IPP projects had to be resumed, including the Tanjung Jati B project.

Funding for its construction will come from the Japan Bank for International Co-operation (JBIC) and the syndication of other Japanese-based financial institutions.

Once construction is completed, the power plant will be leased to PLN.

The Tanjung Jati B project was initially owned by a consortium led by a Hong Kong developer. Initially, Sumitomo had only participated as a construction