Kadin: 50 power projects face difficulties in reaching financial close

By Brigida Ernestina Elu Wea

Permit issues and other problems such as lack of transmission lines and a central bank regulation requiring the use of rupiah in domestic transaction have hampered power companies from concluding financial close for their power plant projects, according to an industry leader.

Dharma Djojonegoro, Head of the Electricity and Coal Committee at the Indonesian Chamber of Commerce and Industry (Kadin), said that there are currently around 50 independent power producers which have signed power purchase agreements with state-owned electricity company PT PLN for their proposed power plant projects, but have yet to conclude financial close.

Two of the projects have capacity of about 1,000 MW, while the others have capacity of around 50 MW.

?Banks are very careful in providing funding (for the projects) as they consider the size of funds, permit issuance, and availability of transmission. These are the points that remain difficult to be settled in this country which make many of the projects have yet to reach financial closing,? he told Petromindo.com on Monday.

He urged the government to make ?breakthroughs? to resolve the problems to help speed up the construction of power plant projects. The current government has set an ambitious target to develop a combined 35,000 MW of power plants in the period of 2015-2019.

Dharma also said that a Bank Indonesia, central bank, regulation requiring the use of rupiah for domestic transaction including sales of electricity has discouraged some foreign lenders from funding local power plant projects. Most domestic power plant projects rely on foreign loans.

Editing by Reiner Simanjuntak