ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailMenu BurgerPositive ArrowIcon PrintIcon SearchSite TitleTitle ChevronIcon Twitter
Business

Construction of Indonesia's largest coal plant begins

 (placeholder image)
Indonesian President Joko Widodo, center, and officials arrive for the inauguration of a power plant project in Ujung Negoro in Central Java, Indonesia, in 2015.   © Reuters

JAKARTA -- The construction of a coal-fired power plant that could become the largest in Indonesia is finally set to kick off, after years of delays due to land acquisition and legal problems.

The Japanese-Indonesian consortium that won the project, Bhimasena Power Indonesia, on Wednesday said it had completed the financing for the 2x1 gigawatts power project in Batang district, Central Java province.

"After the financial close, construction of the power plant should immediately begin," Bhimasena President Mohammad Effendi said in a press statement.

He added construction would take about four years, and the plant was expected to commence operations only in 2020.

The Japan Bank for International Cooperation announced last Friday that it signed a loan agreement amounting to $2.05 billion with the consortium -- which consists of Japan's Electric Power Development and Itochu Corporation, and Indonesia's Adaro Power, a subsidiary of publicly listed Adaro Energy.

Adaro said total investment for the project was $4.2 billion, of which $3.4 billion would be in the form of loans. Apart from JBIC, a syndication of nine commercial banks -- including Sumitomo Mitsui Banking Corporation, The Bank of Tokyo-Mitsubishi UFJ, DBS and OCBC -- will also provide the funds.

The consortium will build, own and operate the power plant, and will sell the generated electricity to state utility Perusahaan Listrik Negara for 25 years. This is based on a power purchase agreement signed by both parties in 2011.

Despite the contract, and despite President Joko Widodo's administration's revival of the project under his 35 GW electricity program launched in May last year, construction had been delayed.

The consortium attributed the years of delays to "difficulties related to land acquisition." Local residents in Batang had strongly opposed relocation from the 125,000 sq. meters required for the plant.

But the Supreme Court ruled in favor of the goverment in March, in a legal challenge against the power project. On Wednesday, Effendi claimed that land acquisition problems have been cleared.

Strong opposition also has come from environmental groups. Greenpeace, for example, said the power plant, if built, could pump 10.8 million tons of carbon into the air -- "greater than the entire emissions of Myanmar."

The case with the Batang power plant reflects challenges faced by the Widodo administration to increase Indonesia's power generation capacity by 35 GW between 2015 and 2019 -- to drive the country's economic growth and channel power to remote regions that have no access to electricity.

As of May, only 170 megawatts were operational -- or as little as 0.5% of the target.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Get Unlimited access

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends June 30th

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media