Power investors ask for government guarantee

Power investors want the government to provide them with a “guarantee” that they will protect them against losses in the future, Investor Indonesia and Media Indonesia reported on Tuesday.

The paper quoted by director general of electricity and energy utilization at the Ministry of Energy and Mineral Resources Luluk Sumiarso was quoted as saying that the investors voiced the request during a meeting with several ministers, including Coordinating Minister of the Economy, the Minister of Energy and Mineral Resources and Minister of Finance, and state electricity company PT PLN on Friday.

They asked the government to provide either “letter of guarantee”, “support letter” or “comfort letter” for their projects.

Luluk said the government was studying the request, but basically, the government wanted that all power projects are developed based on business-to-business contracts.

“Minister of Finance is studying and will decide on the request,” Luluk said.

In the past, PLN signed power purchase agreements with 27 independent power producers (IPP), who all got one of the above-mentioned letters. As a consequence, when PLN was unable to pay its obligation to the investors, the IPPs asked the government to cover the obligation.

According to Luluk, a number of investors, including local ones, have shown interest in developing power plants in Indonesia. Different from foreign investors, local investors do not ask for the government’s “guarantee”.

The government will liberalize the country’s power sector in 2006 and has stated several times that Indonesia needed between $22 billion and $28 billion in new investment in the sector until 2010 in order to meet the growing demand of power. (*)