Medco sees risk in Jawa-1 power plant project
Tuesday, October 4 2016 - 12:40 AM WIB
Private power firm PT Medco Power Generation Indonesia (MPGI), a subsidiary of IDX-listed energy company PT Medco Energi Internasional Tbk, revealed on Monday that it had made suggestions to state-owned electricity firm PT PLN to resolve a key issue that may cause delay to the financial close of the PLTGU Jawa-1 combined-cycle power plant project, but the utility company declined to accommodate the proposal.
Lukman Mahfoedz, President Director of MPGI, acknowledged that the company had given notes to the terms of the power purchase agreement (PPA) as contained in the request for proposal sent to bidders during the tender process of the Jawa-1 project, particularly regarding the bankability issue in relation to visibility of LNG supply arrangement. He said that the Asian Development Bank (ADB), which was one of Medco?s lenders, had expressed concern over the issue.
?Medco had made suggestions to resolve the bankability problem in its tender proposal, but PLN could not accept any changes in the PPA which has been sent to all bidders. As such, PLN could not continue evaluating the Medco-led consortium proposal in the next tender stage (envelope 2),? Lukman explained to Petromindo.com.
He further said, that Medco has always been applying prudent and commercial principles in carrying out projects.
?With (the terms of) the current PPA, we considered the bankability (issue) expressed by ADB could potentially cause delay in the financial close, which according to the regulation must be reached one year after the signing of the PPA. If there is a delay (in the signing of the financial close), then the performance security worth US$240 million can be taken by PLN. Without support and commitment of the lender, we of course could not run the project on time. The potential risks must be really assessed by Medco,? Lukman said, adding that MPGI is the leader of a consortium whose members included Nebras Power of Qatar, KEPCO of South Korea, and another Medco unit PT Medco Power Indonesia.
As had been previously reported by this portal, the consortium failed to pass the technical and administration criteria selection process during the tender of the 1,600 MW PLTGU Jawa-1 combined-cycle power plant project. Three other consortiums including consortium of Mitsubishi, Jera Power Corp, PT Rukun Raharja, and PT Pembangkit Jawa Bali; consortium of PT Pertamina, Marubeni and Sojitz; and consortium of Sembcorp Utilities, and PT Adaro Energy Tbk passed the first round tender process.
Lukman said that his consortium had prepared the required land for the planned project at the Marunda Industrial Estate, which is close to PLN?s Muara Tawar power plant, with transmission line of only about 2 km from the Muara Tawar relay station. He added that the consortium selected GE?s efficient HA-02 technology for the project, and Hyundai Engineering as the EPC contractor, which is also currently installing similar units in Malaysia, Kora and Thailand.
?So we?re confident that our tariff proposed to PLN was the lowest and most competitive,? he said.
According to information obtained by Petromindo.com, the bidding price made by tender participants was quite competitive ranging from $5.5 billion to $6.5 billion for the power plant plus the FSRU.
Editing by Reiner Simanjuntak