Government will guarantee power projects: Vice President

Vice President Jusuf Kalla said in Jakarta Monday that the government would fully guarantee the funding for construction of coal-fired power plants, which would be built as part of the government's fast track program to provide additional power supply of 10,000 megawatts within three years.

Speaking to reporters in Jakarta on Monday following a coordination meeting with Minister of Energy and Mineral Resources Purnomo Yusgiantoro, State Minister of State Enterprises Sugiharto and directors of state owned electricity company, Kalla said that the guarantee would be soon issued by Minister of Finance to ensure that the fast track program to provide cheaper power supply would run according to schedules.

"All are according to schedules, although the bidders have asked to extend the deadline for submitting their bids for two weeks to Sept. 20 from Sept 6 as originally planned," he said.

Kalla said with the construction of coal-fired power plants, PLN was expected to be able to reduce the high operating costs due to the use of diesel oil so that in the coming years the company would no longer need to increase electricity tariffs.

The government has provided subsidy worth trillions of rupiah to help PLN cope with its financial problem.

Meanwhile the utility will need to upgrade and add to its transmission network to accommodate 6,900 megawatts of proposed coal-fired generation capacity, Muljo Adji, general manager of supply and demand at the Java-Bali grid, said in Jakarta Monday.

Power outages are becoming more frequent in Java, the country?s most populous island, because the utility is hobbled by a government mandate to cap prices and doesn?t have funds to upgrade its aging network. The government in March scrapped a plan to raise rates and ordered PLN to build 10,000 megawatts of coal-fired power plants by 2009 to cut dependence on oil.

?This is our priority as there?s no use of new capacity if it?s not connected to the system,? Herman Darnel Ibrahim, PLN?s vice president of transmission and distribution, said in a phone interview. The utility will complete the tender for the transmission projects by year-end, he said, declining to say when the company will start asking for bids.

PLN will also need another Rp 29.6 trillion to build additional sub-stations and connect more houses to the grid to expand its consumer base on Java island.

The utility said in July it plans to raise about $1 billion selling Islamic bonds this year to finance some of the 10 coal- fired power plants in Java that it plans.

PLN will fork out 15 percent of the project costs while contractors provide the rest through export credits.

As many as 43 local and foreign companies have passed the prequalification to take part in the tender for the construction of 10 coal-fired power plants. Nineteen of them will join the tender for the construction of coal-fired power plants with a capacity of between 300 MW and 400 MW and the others will join the tender for the construction of coal-fired power plants with a capacity of between 600 MW and 700 MW (*)