Foreign Fund Not Needed in Power Projects

VIVAnews - The Indonesian government is expected of avoiding using funds acquired from foreign loans, even if it is a soft loan, in developing electricity infrastructure. The State Electricity Firm (PLN) and local private companies are able to work together to fund the projects.

According to economic observer from Atmajaya Catholic University, A Prasetyantoko, national entrepreneurs are able to build electricity generators, which is why foreign loans are not required. “For the sake of the nation, private companies and PLN can collaborate,” he said in Jakarta on January 20.

Prasetyantoko also said a lot of national private companies have good track records in electricity infrastructure development. Therefore, PLN is assured to set up cooperation with the companies. “We have to promote nationalism. As long as local companies can afford it, why don’t give them a chance?” he said.

Furthermore, foreign loans with low interest rate such as the one from Japan Bank for International Cooperation (JBIC) should be used for government projects in other sectors. JBIC funds can also be used for projects that do not interest private companies, such as those developed in eastern Indonesia where access to electricity is urgently needed.

“The soft loan from JBIC should be allocated to projects which increase the ratio of electrification in the eastern areas of Indonesia,” Prasetyantoko said.

As reported earlier, the government will most likely use foreign loans to fund the second stage of 10 thousand-megawatt project that will be worked on by PLN. During the first stage of the project, more than 75 percent of the funds were obtained from the loans provided by Chinese financial institutions. Aside from local services and goods requirement, the electricity project investment was higher than expected.

On the other hand, the government intends to continue using foreign loans to fund the project’s second stage where 54 percent or 5.130 MW will be built by PLN. Meanwhile, the remaining 4.370 MW or 46 percent, in which most of the amount are geothermal-powered electricity generators, will be tackled by Independent Power Producers (IPP).

The total amount investment of the whole project is estimated to be US$14.9 billion. US$ 14.5 billion will be used for the generators and US$ 0.4 billion will be used for transmission and distribution network development.

The government has also established PLTA Asahan III project with the capacity of 2X90 MW in Porsea, Toba Samosir regency, North Sumatra which was carried out by PLN using JBIC funds which was included in the second stage of 10 thousand-MW project. The total amount of investment was US$ 420 million despite PLN’s ability of lowering the number to US$ 350 million. JBIC provide loans with only 0.7 percent of interest rate per year and 40-year tenor.

North Sumatra Local Development Planning Agency Head Riyadil Akhir Lubis wishes the project to be organized by a private party because private companies are willing to invest less amount of money in the project than PLN.

Based on the information, private companies working on PLTA Asahan III are ready with US$ 320 million or lower than PLN who acquired US$ 420 million from JBIC.

In addition, according to Lubis, the companies are able to build the generators in 36 months while PLN proposed 48 months’ time.

“It will also be beneficial for the government if the generator development is handled by a private company because the government won’t have to take risk of possible cost increase due to price fluctuation,” he said.

Member of the House of Representatives’ Commission VII of Democratic Party Faction from North Sumatra Sutan Bhatoegana asked the Asahan III project to be done collectively by PLN and private companies. “PLN could work together with private companies that have location permits,” he said.

When the late North Sumatra Governor Tengku Rizal Nurdin issued a location permit for local private developer, PT Mega Power, PLN insisted of keep working on PLTA Asahan III. The stand was proven by refusing the power purchase agreement (PPA) proposed by PT Mega Power to PLN.

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Translated by: Nataya Ermanti

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29 Maret 2024