Release: Wood Mackenzie: Delivery of crash projects on time is vital for Indonesia power supply

(Singapore, 1st April 2010) ? On time delivery of Indonesia's electricity supply program Crash Build I and II are crucial for the security of power supply in Indonesia says Wood Mackenzie in a recent report titled 'Indonesia Crash Build II- Aspirations and Uncertainties?. Wood Mackenzie's analysis shows that any further delays to the projects which are run by state-owned electricity company PT Perusahaan Listrik Negara (PT PLN) risk shortages in meeting the country's robust demand growth.

Graham Tyler, Manager for South East Asia Gas and Power Research and co-author of the report says, ?Our analysis shows that demand in the Java-Bali region is forecast to steadily grow by an average of eight percent a year through to 2020, however the country's electricity program has been subject to several delays which risks sufficient supply being ready in time to meet this growth in demand. The Crash Build I program was slated for completion by 2011, a date that has been revised several times. The delays have come about due to PT PLN?s difficulty in securing funds on time, land acquisition problems, escalated construction costs and access to transmission infrastructure.?

In February 2010, PT PLN updated the status of all the projects under the program once again for completion by 2014. However Wood Mackenzie maintains a conservative view and does not expect full completion of the first phase until closer to 2016.

Crash Build II was announced earlier this year with 94 locations for the plants to be built across Indonesia and the associated transmission infrastructure. The projects are evenly distributed between PT PLN and independent power producers with the majority of supply targeted for Java.

Tyler says, ?The reserve margin of eight-percent for a peak demand of 18,500 megawatts (MW) in the Java-Bali grid has resulted in power shortages in Java. Hence, the Indonesian Government has been pushing PT PLN to deliver announced projects on time by 2018. If this is achieved, a healthy capacity with 20% reserve margin will be maintained in the Java-Bali region: enough to ensure power system reliability. That being said, we expect that more delays are possible in the projects as per Crash Build I. Therefore, we forecast a more conservative view that reserve margins will remain closer to ten percent, which would be insufficient to ensure the reliability of the grid at all times.?

The funds required to complete the existing PT PLN projects along with the ones announced in the Crash Build II program are estimated by Wood Mackenzie to be USD$21 billion. Tyler continues, ?The main challenges that Crash Build I face are likely to remain for Crash Build II ? such as financing; plant-siting; and fuel procurement. Although the last two issues will be somewhat mitigated by the addition of three large-scale single site projects each using a single fuel - coal, gas or hydro, the geothermal projects, which are biased to the private sector, are more fragmented and smaller scale projects.?

Wood Mackenzie says that as the latter projects tend to be in remote locations, they will therefore have additional problems relating to transmission line construction such as land access, compensations and potential public opposition.

Wood Mackenzie forecasts that the development of the announced projects in Crash Build II will play a major role in maintaining the system?s reliability, in particular in the Java-Bali grid. But due to challenges which will/could delay on time completion, maintaining the security of supply in West Java will be a major challenge for PT PLN in the coming decade. (end of release)