Sojitz joins venture for Indonesian coal-fired power plant: Report

Trading house Sojitz Corp. is joining forces with a U.S. power company and an Indonesian energy company in building a large power plant in Indonesia that uses low-grade coal, the Dow Jones Newswires reported on Wednesday quoting The Nihon Keizai Shimbun.

Sojitz will shoulder 25% of the estimated total investment of US$1.5 billion (about Y180 billion). Amid high energy prices, Sojitz is aiming to tap brown coal, which is low-grade but cheap, to power the plant.

The alliance of Sojitz, AES Corp. (AES) and the local energy firm will ink a deal Wednesday to supply power to Indonesia's state-run PT PLN.

Their 1,200 MW facility will be within about six miles of a brown coal reserve in southern Sumatra. Groundbreaking is expected next year, with completion slated for 2011. Coal will be transported via belt conveyor to the plant, which will supply power to the island of Java as well through PLN.

To be profitable, a plant must be built near brown coal reserves because transporting this coal requires a great deal of space, making exports a costly option. In addition, brown coal is not efficient when burned. A large special boiler will be installed at the facility to raise the brown coal's combustion efficiency.

Western China and Vietnam also have large reserves of brown coal. Sojitz is considering similar projects in Asian locations outside Indonesia.(*)