Low rank coal producers step up fight to win S. Sumatra power projects
Wednesday, August 27 2014 - 02:55 AM WIB
In what is seen as heightening tug of war among participating bidders of the lucrative South Sumatra 9 and 10 coal-fired power plant projects, five low-rank coal producers insisted that coal with calorific value of 3,000 kcal/kg would be the best type of fuel for the planned mine-mouth power plants.
The five mining firms, which are among of the eight coal firms participating in the bid to win contracts for the development of the 2x600 MW South Sumatra 9 and 1x600 MW South Sumatra 10 projects proposed by state-owned electricity firm PLN, argued that South Sumatra has huge reserves of low rank coal, which are not exported, thus ensuring long-term security of supply for the power plants.
In contrast, higher CV coal of 4,000 kcal/kg are tradable and has market overseas, which could prompt the miners to turn to the global market once the price of the commodity recovers, thus providing long-term supply risk for the power plants. ?This is risky because it may undermine the security of supply,? General Manager for Business Development at low rank coal mining firm PT Pendopo Energi Batubara Bambang Triharyono.
Pendopo and four other low-rank coal producers including PT Hanson Energy, PT Adi Coal Resources, PT Adimas Puspita Serasi, and PT Bumi Sekundang Enim Energy (not PT Baramulti Sugih Sentosa Indonesia as reported earlier in this portal quoting Kontan daily) held on Tuesday a media gathering to protest the recent letter of Minister of Energy and Mineral Resources Jero Wacik to PLN.
Jero in the letter asked PLN to abandon its plan to require the winning bidders of the South Sumatra 9 and 10 projects to use the 3,000 kcal/kg coal as fuel for the planned power plants. The minister said that PLN must not limit the type of coal to be used in the projects, insisting the company to instead ensure cost efficiency.
Jero?s letter came following protest from other bidders such as coal giant PT Bukit Asam Tbk over the PLN policy to require the use of the 3,000 kcal/kg coal in the projects, arguing that to ensure lower production cost, PLN should instead opt for the use of the 4,000 kcal/kg coal in the projects.
Elsewhere, Bambang said that the government would obtain greater benefit in terms of higher royalty revenue if the 4,000 kcal/kg coals are dedicated for the export market, while the use of the low rank coal in mine-mouth power plant projects would utilize the huge reserves of the commodity.
He acknowledged that if PLN does not limit the CV of the coal in the power plant projects to 3,000 kcal/kg as initially planned, the low rank producers would lose in the tender as the producers of the 4,000 kcal/kg would gain in terms of lower production cost.
The five coal miners also appealed to PLN to delay unveiling the results of the tender process until the new government of President elect Joko Widodo is installed in October.
Editing by Reiner Simanjuntak