Indonesia, Sumitomo agree on Tanjung Jati B power project

The Indonesian Government and Japanese giant Sumitomo Corporation have agreed to resume the construction of the coal-fired Tanjung Jati B power plant under a build, lease and transfer scheme, Minister of Mines and Energy and Mineral Resources Purnomo Yusgiantoro has said.

The minister said that the agreement was signed in Jakarta on Friday. ?As the Tanjung Jati B power plant will be built under a leasing scheme, the negotiation only covered the capital expenditure of about of 3 U.S. cent per kWh. The cost for the power generation is not 3 cent because it will include other component,? he was quoted as saying by Satunet news portal on Friday.

Previously, the price of the electricity from the power plant, which is jointly owned by Sumitomo and its local partner PT Hopewell Impa Power Tubanan, was set at 4.3 cent/kWh

Japan Bank for International Cooperation (JBIC) will provide the financing of the project only if the government guarantees the resumption of the project.

Purnomo said that with the leasing pattern, the Indonesian government would not be burdened because the financing would not involve any loans. In addition, the local funds for the project would not be higher than $500 million, while its construction would not need approval from the House of Representatives because it could be carried out under a business-to-business approach, he added.

But the minister acknowledged that such financing scheme required the so called a liquidity facility, a kind of a guarantee from the government on the future of the power project. (*)