Ambitious power project faces huge obstacles

The new government?s plan to build power plants with a combined capacity of 35,000 MW over the next five years will be difficult to realize due to a number of major obstacles, Kontan reported on Monday.

The paper quoted National Development Planning Agency (Bappenas) Deputy for Infrastructure Development, Deddy S. Priatna as saying that the first obstacle is the lengthy permitting process for power plant project that may take up to four years to complete, which would make it difficult to realize the projects by 2019 as targeted.

The second obstacle is the financing capacity of state-owned electricity firm PT PLN, whose debt to equity ratio has reached a staggering 257 percent.

Of the target to build 35,000 MW power plants, PLN has been assigned to develop about 15,000 MW power plants, which will require about US$22.5 billion in investment. Construction of the remaining 20,000 MW will be assigned to independent power producers (IPPs).

The third obstacle is land acquisition problem particularly in forest areas, and the fourth is legal certainty as investors worry that a change in government may affect their projects. (*)