Megawati approves plan to resume Tanjung Jati B power project

The resumption of the Tanjung Jati B power project has received a final approval from President Megawati Sukarnoputri, and the construction work of the power plant which will have a generating capacity of 1,320 megawatt is scheduled for completion in 2005, Bisnis Indonesia reported on Thursday.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said in Jakarta on Wednesday that the government and the investor were finalizing the term of the contracts of the project which would be carried out under Build, Operate and Transfer (BOT) arrangement.

"The financial scheme of the project should be first finalized before resuming the project," the minister said following a meeting on the country?s electricity shortage led by President Megawati.

According to Purnomo, the meeting also clarified the responsibilities of the government and the state owned electricity company PLN if there is a failure in the payment of the debt used to finance the project.

The government, for example, will be responsible for the debt repayment if PLN fails to repay the debt due to the sharp depreciation of the rupiah against the U.S. dollar. "But if the failure to repay the debt results from inefficiency, it is PLN which will take a full responsibility," the minister said.

The negotiation on the development of the Tanjung Jati B power projects between the government and its developer Sumitomo Corporation of Japan and its creditor JBIC are currently underway. The developer has pledged that it will continue the project and inject fresh investment of about US$400 million if the government will guarantee it.

The investor also demands a change in the power purchasing agreement signed with the state owned electricity company PLN. Under the agreement, PLN will buy the electricity at between US$0.42 and US$0.43 from the power project which has been 60 percent completed. (*)