Government may reject Tanjung Jati B investor?s proposal

The government has hinted that it would reject the proposal from the developer of the steam power Tanjung Jati B electricity plant to provide a guarantee if the project fails, Media Indonesia reported on Thursday.

The acting chairperson of the team for the restructuring of the state owned Electricity Company PLN, Ratna Djuwita said in Jakarta on Wednesday that the government would avoid providing any kinds of guarantee commitment for the development of power projects in the country.

"We don?t want the bad experience on the geothermal power plant Karaha Bodas be repeated again," she said, adding the government had been asked to pay a large amount of compensation funds due to the failure of the geothermal power project.

According to Ratna, the development of the Tanjung Jati B power project is purely a business to business (B to B) deal. "The government should not therefore be involved and asked to bail out if the project fails," she added.

The negotiation on the development of the Tanjung Jati B power projects between the government and its developer Sumitomo Corporation of Japan and its creditor JBIC are currently underway. The developer has pledged that it will continue the project and inject fresh investment of about US$400 million if the government will guarantee it.

The investor also demands a change in the power purchasing agreement signed with the state owned electricity company PLN. Under the agreement, PLN will buy the electricity at between US$0.42 and US$0.43 from the power project which has been 60 percent completed. (*)