Govt prepares Presidential Regulation to guarantee 10,000 MW power project

The government is preparing a Presidential Regulation that will authorize Minister of Finance to issue a comfort letter for the construction of coal-fired power plants, which will be built as part of the government?s fast track program to provide additional power supply of 10,000 MW within three years.

The comfort letter is expected to be included in the state budget for 2007 now under discussion. ?The Presidential Regulation is needed so that this will not run counter with the Presidential Decree No. 59, 1972. This (the Presidential Regulation) will serve as a legal umbrella for the Minister of Finance to issue a comfort letter or whatever form it will be,? said the Fast Tract Program?s head Yogo Pratomo following a meeting with bidders and the management of state electricity company PT PLN in Jakarta Wednesday.

In the meeting, Yoga proposed a comfort letter concept that the government will give to contractors joining the bid. Later, the Finance Minister on be half of the Government of Indonesia based on the authorization mentioned in the Presidential Regulation, will guarantee PLN?s obligation to pay its loan to contractors according to the agreement.

Of the required investment, around 56 percent will be used to finance the construction of power plants. Under the cost structure plan, the funding for the project will come from loan amounting to about Rp 79 trillion from ECA, the issuance of bond worth Rp 33 trillion and Rp 59 trillion from PLN?s own funds.

To date, several consortiums from four countries ? China, Japan, Germany and France - have expressed their readiness to provide export credit in regard to the project.(godang)