Analysis

President In Central Java: Officially Opened Steamed-Powered Electric Generator Tanjung Jati B, 29 October 2006.

President SBY on Saturday (14/10) afternoon officially opened Steamed-Power Electric Generator (PLTU) Tanjung Jati B, in Subdistrict Bangsri, Jepara Regency, Central Java. The development of the PLTU was once stopped due to monetary crisis in 1977, then it was continued in the middle of 2003.

In his report, Minister Purnomo Yusgiantoro said that the development of Tanjung Jati B was postponed due to monetary crisis in 1997. In the middle of 2003 the development was continued by doing renegoitation. PLTU Tanjung Jati B which is using coals from East Kalimantan, has 2 x 660 megawatts capacity. The cost for the development was about 1.5 billion US Dollars and will be buit on a plot of land of 150 hectares wide, and it has three thousand employees.

Stalled Suharto-era power plant to be restarted, Bill Guerin, Asia Times, 6 August 2003.

With Indonesia’s power needs hovering on the critical, a mothballed specter from the unlamented Suharto past – a 1,320-megawatt coal-fired plant in central Java – is being resurrected along with more than two-score other Suharto-era plants that were halted when the aging dictator fell from power in 1998. This time, however, they are to be run more rationally. The cash register in front of the ill-starred Tanjung Jati B plant, as it was known, was operated by Suharto’s daughter, Siti Hardiyanti Rukmana. Siti’s PT Impa Energy Co simply took a 20 percent stake in Tanjung Jati B, begun in 1997 by Hong Kong-based Hopewell Holdings, as a cost of doing business. PT Impa Energy’s stake was to be covered by a purchase price of US$0.0645 per kilowatt-hour – more than 50 percent higher than contracts are being negotiated today – that Hopewell had “negotiated” with Indonesia’s state electricity utility, PT Perusahaan Listrik Negara (PLN). Japan’s giant trading house, Sumitomo, was the designated engineering and equipment contractor. The plant was originally planned to be finished in 2004 but was shelved when it was 70 percent completed after critics, including the World Bank, said power purchase prices were much too high.

In July 1999 Jakarta approached Japan asking it to bail out the project and eventually, in December 2000, Sumitomo announced it was interested in more than just constructing Tanjung Jati B. In June 2001 Hopewell’s chairman, Gordon Wu, who himself was nearly driven bankrupt by the Asian financial meltdown, said he had reached a provisional agreement with Jakarta to sell his interest in Tanjung Jati B, and that Indonesia would seek a soft loan to finance the acquisition. Wu eventually declared force majeure, a legal stratagem intended to excuse him from liability on the ground that failure to perform could not be avoided by the exercise of due care. He abandoned what had become a white elephant that had cost him HK$4.8 billion (US$640 million). He sold out to Sumitomo early last year and pocketed a mere US$215 million after settling outstanding contractors’ bills of $38 million. Suharto’s daughter’s company walked off with $53 million.

Sumitomo announced last week that it was about to resume building the $1.65 billion project. It will provide $550 million, with the rest funded by the Japan Bank for International Cooperation (JBIC) and a consortium of Japanese financial institutions. At the end of March Tokyo committed to a yen loan deal worth $616 million to be used to expand the capacity of the Muara Tawar and Muara Karang gas-fired power plants, just outside Jakarta. Indonesia’s oldest ally and investor, Japan, will be the country’s biggest creditor by far when Jakarta severs its link with the International Monetary Fund, which came in to attempt to rescue the economy in 1997 after the Asian financial meltdown. The many Japanese businesses operating in Indonesia, particularly in the manufacturing sector, are keen to see a secure and developed power infrastructure, especially in industrialized West Java.

Possibly out of fear of PLN default, JBIC asked the government to provide a guarantee. Jakarta will provide modest financial support – $540 million by way of a liquidity facility covered by a sovereign guarantee. In the event of PLN’s default the guarantee would kick in and it would take over the loan repayments, though PLN would be expected to repay the government. PT Central Java Power (CJP) will manage the project along with PLN. The latter will rent the plant from CJP for power distribution to the public when it is finished in 2006. PLN will buy the power at a negotiated price of $0.04 per kilowatt-hour.