Govt drafting regulation obliging SOEs to build hydropower plants

The government is preparing a governmental regulation assigning several state owned power plants (SOEs) to build hydropower plants and dams as part of the 35,000 MW power plant projects.

?Going forward, we want all dams have hydropower plants,? Deddy S. Priatna, Deputy of Facilities and Infrastructures at the National Development Planning Board (Bappenas) was quoted by Bisnis as saying.

SOEs that will be assigned to build the hydropower plants will be awarded a concession to operate the hydropower plants within a time frame agreed upon by the government and the SOEs.

He said the revenue prospect of hydropower plants is promising. Thus, the government is convinced the regulation will be warmly wecome by SOEs.

Besides, he said, the issuance of such a regulation is part of a belt-tightening measure on the part of the government. Until now, the government financed the development of all dams across the country using the state budget. With the planned regulation, SOEs will share the costs of developing the dams.

?In the past, the government wholly financed the development of dams. Going foward, the government will only provide 30 percent of the needed funds, that will be mostly used for land appropriations,? Deddy said.

Deddy noted that the government will also provide Viability Gap Funding (VGF) to SOEs assigned to build the dams and hydropower plants. The VGF is however varied depending on the Financial Internal Rate of Return (FIRR) of each project.

?The VGF is a must. Otherwise, the projects will not be financially interesting for SOEs,? he said.

Meanwhile, Mudjiadi, acting Director General of Hydro Resources at the Ministry of Public Works and Public Housing, said the presidential regulation is scheduled to be issued this year. At present, he said, the government is speeding up the drafting process of the regulation involving several ministries and governmental institutions, including Bappenas, the Ministry of Public Works and Public Housing, the Coordinating Ministry of the Economy, the Ministry of State Enterprises, the Ministry of Energy and Mineral Resources and state owned electricity firm PT Perusahaan Listrik Negara (PLN). (*)