indonesian power sector[1]

A Project co-financed byEU-Indonesia Small Project Facility

EUROPEAN UNION

Indonesian Power Sector

EU-Indonesia Infrastructure

Forum

�INDONESIAN POWER SECTOR

EU-Indonesia Infrastructure Forum

EUROCHAM

The European Business Chamber of Commerce in Indonesia (EuroCham) is promoting European business interests in Indonesia. The chamber represents around 100 European companies and organizations. As a non-profit organization, the chamber supports both small and large member companies through a wide range of essential services in the areas of information exchange, lobbying and networking. EuroCham maintains close working relationships with key European institutions, such as the European Commission, the European Parliament and, European bilateral chambers of commerce in Indonesia. For more information on EuroCham, visit the chamber’s Website at www.eurocham.or.id.

The EU-Indonesia Infrastructure Forum

EUROCHAM, in association with KADIN, is carrying out the “EU-Indonesia In-frastructure Forum” project which is supported by the European Commission through the Small Project Facility (SPF) provided by the EC Delegation in Indone-sia. The project aims at enhancing partnerships between European and Indone-sian companies in the area of Public-Private Partnerships in infrastructure. Activi-ties under the project include reports to provide updated information to European companies, training on PPP for Indonesian companies and government officials and business support to EU and Indonesian companies.

The EU-Indonesia Infrastructure Forum project intends to contribute towards meeting the orientations and objectives of the Indonesian government and the private sector as they were stated at the Infrastructure Summit held in January 2005 and reaffirmed at the Infrastructure Conference and Exhibition held in No-vember 2006, where EUROCHAM organised a Pavilion of European companies active in infrastructure. The project pursues and deepens the study work on investing in Indonesian in-frastructure initiated by the European Commission in 2005 while widening the dissemination of information on investment conditions and project opportunities to European companies.The project will also support EU companies in their approach of the Indonesian infrastructure market place by organising workshops and business missions, as well as providing information, training and business opportunities to Indonesian companies.

� INDONESIAN POWER SECTOR

Foreword

This report is issued within the framework of the ”EU-Indonesia Infrastructure Forum” project which is co-financed by the EU-Indonesia Small Projects Facility (SPF) of the European Commission. The information in this document is believed to be correct as of November 2007 but no responsibility is taken for its accuracy.

This report has been produced with the assistance of the European Union. The views expressed herein are those of Eurocham and the Consultants and can therefore in no way be taken to reflect the views of the European Union.


At present, only 60% of Indonesia’s population has access to electricity. The Government’s objective is reach a level of provision of 90% of the population by 2020. To achieve this target,1.3 million new connections are needed each year, compared with about 1 million new connections/year achieved now.

Indonesia’s installed capacity is about 28.000 MW. Demand for electricity is growing at around 6% per year and this rate should accelerate to 7-9% in the coming years.

The present system is barely sufficient to meet existing needs. There are frequent black-outs all over the country, with the exception of Jakarta. Many industries have resorted to installing their own power plants.

The power sector faces momentous investment needs. PLN estimates that about USD 90 billion need to be invested up to 2026 in generation, transmission, and distribution investment in order to keep pace with power demand growth and to maintain system reliability.

The Government is reviewing its policies with regard to electricity, in particular the PSO strategy. A Policy Framework for Regional Electrification and Rural Access is under preparation with the aim to put in place an environment that would support the development of local solutions to meet electrification needs. Sub-national solutions could be a way forward for increasing access to electricity in the absence of significant sector reforms at the central level. These decentralized solutions could be a viable complement to PLN. The new law on electricity is expected to include provisions to that effect.

PLN generates about 85% of the electricity produced in Indonesia, the balance being produced by Independent Power Producers (IPPs). PLN operates all transmission and distribution activities.

Overview of the situation of the power sector


Through tariff increases, efficiency improvements, loan restructuring and government subsidies, PLN had managed to overcome the effects of the Asian financial crisis and to reduce its operating losses in 2004.

However it has again incurred large losses since 2005 due to the high cost of its supplies (fuel costs make up 85% of its operating expenses) and insufficient tariffs. PLN is obliged to apply the national electricity tariff (TDL), a uniform tariff structure that is applicable throughout Indonesia, which is insufficient to allow cost recovery. The government gives PLN a Public Service Obligation (PSO) subsidy to cover the shortfall resulting from the high costs of supply and inadequate tariffs. PSO payments, which were around $400 million in 2004, increased to over $3.5 billion in 2007.

In order to reduce costs and subsidies, and with a view to meeting climate change mitigation objectives, the Government intends to improve the country’s fuel mix.

Indonesia has abundant energy resources that can be used for power generation. Their development has been hampered by Government subsidies for petroleum products. The Government has announced a policy to diversify from diesel based generation towards greater utilization of coal, natural gas, and renewable energies.

In view of PLN’s urgent requirements, the Government has decided to use coal as the primary resource for new plants, including the 10.000 MW programme it has launched in 2006. Indonesia’s coal reserves are huge and largely untapped. The potential for coal bed methane is also estimated to be large.

Indonesia will also need to develop the supply of natural gas: PLN operates about 3,500 MW of combined cycle gas turbine power plants in Java but it has been using diesel fuel to run these plants due to its inability to secure gas supplies for them. The utilisation of diesel is a key factor in the high cost of supply in Java and Bali.

PLN is making efforts to increase generation and transmission capacity. However most of the sizeable projects that have been recently undertaken will only come on stream in 2009 and beyond.

PLN’s key indicators and business development plan are described in annex 1.

PLN has been mandated to develop an “accelerated programme” (also called fast track or crash programme) to build coal-fired power plants with a total capacity of 10,000 MW. The bulk of this programme is being implemented with Chinese contractors/equipment suppliers under Chinese export finance. PLN is financing the local expenditure part of this programme with the proceeds of a $1 billion international bond issue it successfully completed in 2006. It envisages to tap the bond market again in the future.


Independent Power Producers (IPPs)

PLN’s financial and other resources will not be sufficient to fulfil the country’s enormous needs and private investment in the power sector will be critically required.

In the early 1990s, the Government had launched an ambitious IPP programme. PLN signed agreements with developers of power plans for a total capacity of 11,000 MW, mostly using coal and geothermal resources. Only a few of these projects were implemented, with a total capacity of about 4,000 MW, while the other contracts were cancelled, postponed or re-negotiated due to the financial crisis in 1997 onwards. Some of the projects that had not been cancelled have been reactivated over the last few years, with the original sponsors or with new developers. One project that had not been settled by negotiations went to arbitrage.

Since late 2004, the Government has been trying to again attract private investment into the infrastructure sector, including power. At the Infrastructure Summit in January 2005, 10 IPP projects were included in the list of 91 projects offered to private investors for a total investment amount of about USD 5,2 billion.

Among these projects, only six have been tendered, and two (Cirebon and Cilegon) have been contracted so far. One of the main reasons for the slow process has been the inadequate preparation of the projects, which were released for bidding without proper feasibility studies, risk analysis and bankable draft agreements. In addition, the question of government support has been a difficult issue: the tender documents did not originally include any provision for support, but the investors later insisted on having a letter of comfort from the Government to the effect that it would “cause PLN to honour its obligations” under the Power Purchase Agreements (PPAs).

Furthermore, PLN has entered into negotiations and signed a number of PPAs with private investors, both Indonesian and foreign, for projects that have either been initiated by PLN itself, or by developers. They include a diversified range of plants of different capacities using various energy sources, including renewable sources. A table listing the IPP projects with a capacity above 100 MW is attached as annex 2. It is doubtful that all the projects will be implemented, as worldwide supply conditions in the power sector are becoming increasingly difficult: equipment suppliers experience longer delivery times and supply chains for energy resources are strained. As a result, costs are have been increasing substantially. It is likely that a number of the developers will not have the required capacity and resources to complete the projects.

Some of the projects, however, are significant as they involve reputable operators: Paiton Energy is finalising negotiations for the 800 MW expansion of their existing plant, and the contract for the Cirebon 600 MW new plant should be finalised soon with a group of Japanese and Indonesian investors.


Realising the need to offer better prepared projects to potential investors/operators, the Government has selected two large projects and included them in the list of “model projects” that were presented at the Infrastructure Conference in November 2006. These projects are being prepared jointly by PLN and the KKPPI with the intent of putting together a complete set of bidding documents including a “third generation Power Purchase Agreement”. The current projects use what is called “second generation” PPAs, which are fairly elaborate contracts with a detailed definition of risks. The third generation PPAs will go further in the risk sharing definition and attribution. The current status of these projects is the following: for the “Central Java” (the exact location is not yet decided) 2 x 600 MW coal-fired plant, the feasibility study has been delayed due to difficulties in financing. It is now expected to be completed by mid-2008. As for the Pasuruan 500 MW gas-fired plant, the feasibility study is in progress. One of its objectives is to determine the source of gas supply.

The regulatory framework for IPPs

Regulatory framework for the power sector

The main laws and regulations governing the power sector are described in annex 2 .

Regulatory framework for PPPs

The central piece of legislation for private projects in the provision of infrastructure and public services is Presidential Regulation “Perpres” 67 issued in November 2005. Together with its implementing regulation, Ministry of Finance decree 38/2006, It sets out the rules and procedures for the bidding process. PPP projects may be identified and prepared either by the Government or the private sector, but the sponsors must be selected through open and transparent bidding. Tariffs must be set at full cost recovery level, and if tariffs exceed consumers’ ability to pay, the difference is to be compensated by a subsidy from the Government. Decisions on financial support from the Government are managed by the Risk Management Unit (RMU) of the Ministry of Finance. Public support can only be provided to projects that comply with Perpres 67.

A summary of Perpres 67 and Ministry of Finance Decree 38/2006 is provided in annex 3.

Regulatory framework for IPPs

In addition to the general rules on PPPs, there are specific regulations that govern private investment in power projects:

• Government regulations 3/2005 and 26/2006 on “second generation” IPPs,• Presidential Regulation 71/2006 and 72/2006 and Presidential Regulation

86/2006 on the “Accelerated Coal-Fired Power Generation Projects”,


• Ministerial Decree 44/2006 on the purchase of electricity from non-mine mouth coal fired power plants through direct selection,

• Presidential Decrees 45 and 49/1991, Law 27/2003 and Government Regulation 59/2007 on geothermal energy,

• Ministerial Decree MEM 002/2006 on medium scale power plants utilising renewable energy.

With regard to the selection of developers/investors in IPP projects, the main rules are the following:• The normal selection process involves projects initiated by PLN and included

in its business plan (“RUTPL”). They are tendered according to the usual procedures of pre-qualification, bidding, selection and negotiation of the PPA including the take-off price to be paid by PLN. The price is regulated by the Ministry of Energy and Mining.

• For projects using renewable sources (except geothermal for which specific rules apply), marginal gas, coal at mine mouth and excess power (produced by independent producers for their own use), there is the possibility to be selected by “direct appointment”.

• Direct selection can also apply for non-mine mouth coal fired plants (Government Regulation 26/2006 and Ministerial Decree 44/2006). However the pricing scheme set in the Ministerial Decree is no longer attractive due to rising coal prices, it should be revised.

Renewable energiesIndonesia is rich in renewable energy resources, and could benefit from increasing the share of renewable generation. In order to exploit these resources, there is a need to develop a strategy and action plan to address technical, policy, and commercial barriers that presently hinder progress. At present, the consumption of alternative energy is still very low, at about 0,2% of total energy sources. The recent law on energy and Presidential Regulation on National Energy Policy set out objectives to increase the utilisation of renewable energy sources to 5% by 2020.

Geothermal

Indonesia is endowed with vast geothermal resources. This resource base is believed to be able to produce over 28,000 MW of electricity. Today, only 852 MW are produced by seven power plants. The Government’s objective is to build new capacity for about 3,200 MW before 2018.

The most readily accessible resources are located in Java and Bali, Sumatra, Sulawesi and East Nusa Tenggara. Seventy five percent of this potential is located


in Java, Bali and Sumatra, the most populous islands with the highest demand for electricity.

With the increasing prices of oil and other fossil fuels, geothermal energy should be competitive. However, major issues are impeding its development: high initial capital costs including initial exploration and fuel storage costs, long pay back periods and unattractive take-off tariffs by PLN (PLN’s purchase price is 4,5 US cents/kw whereas developers argue that the economic price should be at 6,5 US cents/kw). Furthermore, the law on geothermal development (law 27/2003) does not provide a tax incentive framework that would be needed to attract investors.

The Government is nevertheless trying to develop the geothermal sector and is planning to launch tenders for five projects with a total capacity of 455 MW in various parts of Indonesia. Meanwhile, Pertamina has announced it will invest USD 22,5 million in the drilling of new wells in Sumatra.

Hydro

Indonesia’s installed capacity from hydro sources is currently 3,200 MW. The country has a potential of hydro power in excess of 75,000 MW scattered on 1,310 locations throughout the archipelago out of which 8,700 MW could be developed with plants of 100 MW or more. Most of the potential in Java has been developed, most of the potential lies in other islands such as Sumatra, Kalimantan and Sulawesi.

Some factors have been hampering the development of hydro energy, including land acquisition problems and the need to invest in transmission lines, most sites being located far from high consumption areas.

PLN is seeking investors/operators to engage in IPP projects. A Norwegian firm has recently announced its intention to invest in two hydro facilities to produce 133 MW in Sulawesi.

Biofuel

Indonesia is taking steps to become a significant actor in biofuel development with the objective of producing 200,000 barrels of oil equivalent per day by 2010.

The regulatory framework for biofuel development consists in Presidential Instruction 1/2006 regarding the supply and usage of biofuel as alternative fuel, Presidential Regulation 5/2006 regarding the national energy policy and Presidential Decree 10/2006 regarding the National Team for Biofuel Development.

In the national energy policy instruction, biofuel is expected to represent 5% of total energy sources by 2015.

Major Indonesian companies and foreign investors, including from China and


Malaysia, have stated plans to develop large plantations and processing plants in the country. The Government has announced plans to designate up to 6,5 million hectares of uncultivated land for the development of biofuel feedstock plantations. In the 2007 national budget, substantial amounts have been set aside to support agricultural development related to biofuel.

Biomass

Being an agricultural country, Indonesia has a large potential in biomass energy.

The potential is estimated to be equal to 50,000 MW. Biomass energy has been utilized for years. It plays an important role in rural areas where it is used by households and small industries. It is estimated that 35% of Indonesia’s energy consumption actually comes from biomass.

PLN has two IPPs under contract, one 6 MW plant in Bangka island using palm plantation waste, and one 2x7 MW plant under construction in Bitung.

Wind

Currently, installed wind power capacity is estimated at about …..The potential of wind energy in Indonesia is relatively small because wind velocity in general is relatively low, ranging from 3 to 5 m/second. However, in certain areas, especially in the eastern islands of Indonesia, wind velocity can reach sufficient levels to power small to medium scale wind turbines.

It is estimated that the potential of wind energy amounts to about 450 MW.

Annex 1PLN operating highlights in 2006:

• 35 million cutomers• Generation capacity: 28,6 GW• Transmission lines length: 30,945 cct• Substation capacity: 54,000 MVA• Primary distribution lines length: 239,000 km cct• Secondary distributuon lines length: 324,000 km cct• Distribution substation capacity: 29,000 MVA

�0 INDONESIAN POWER SECTOR

Description Jan 1,06 up to

Dec 31,06

Jan 1,05up to

Dec 31,05

1-Jan-04up to

Dec 31,04

Jan 1,03up to

Dec 31,03

Jan 1,02up to

Dec 31,02

Electricity Sales 70,735,151 63,246,221 58,232,002 49,809,637 39,018,462

Other Revenues 33,991,385 13,297,103 4,041,060 4,621,141 5,164,892

Total Revenues 105,726,536 76,543,324 62,273,062 54,430,778 44,183,354

Electricity Purchase 14,845,421 13,598,166 11,970,811 10,837,796 11,168,843

Cost of Power Plant Generation 73,750,747 44,718,176 33,796,203 31,384,807 29,445,272

Utilization of Maintenance Material 3,570,416 3,973,066 3,508,272 3,463,610 2,391,061

Utilization of Maintenance Material 3,570,416 3,973,066 3,508,272 3,463,610 2,391,061

Other Operating Expenses 13,061,566 13,734,193 10,435,481 12,900,285 10,144,799

Total Operating Expenses 105,228,150 76,023,601 59,710,767 58,586,498 53,149,975

Operating (lost)/Profit -501,614 519,723 2,562,295 -4,155,720 -8,966,621

Net Income (Expenses) (outside Operating)

-583,721 -2,694,282 -1,117,607 -2,040,885 1,627,069

Profit/(loss) before Deferred Tax -1,085,335 -2,174,559 1,444,688 -6,196,605 -7,339,552

Deferred Tax Expenses -2,972,508 -2,746,035 -3,184,503 -1,388,881 -1,300,858

Loss before Profit from Extraordinary Item

-4,057,843 -4,920,594 -1,739,815 -7,585,486 -8,640,410

Profit from Extraordinary Item 2,129,987 - -281,551 1,685,404 2,362,638

Net Profit/ (Loss) -1,927,856 -4,920,594 -2,201,366 -5,900,082 -6,313,772

Profit/Loss figures for the period 2002 – 2006

Power Production and Purchase In GWh

Year

2002 2003 2004 2005 2006

Own Production 88,068 90,046 93,113 98,177 101,664

Power Purchase 19,067 20,549 23,978 26,088 28,639

Power Rental 1,225 2,435 3,154 3,105 2,804

Total Production 108,360 113,030 120,244 127,370 133,108

Composition of energy sources In %

Year

2002 2003 2004 2005 2006

Fuel Oil 23.5 24.9 29.9 30.6 27.7

Non Fuel Oil

- Water 8.2 7.5 7.4 7.7 6.6

- Coal 27.1 28.2 25.9 26.1 28.8

- Geothermal 2.9 2.6 2.6 2.4 2.4

- Natural Gas 20.8 18.6 14.3 12.7 13.0

- Purchase 17.6 18.2 19.9 20.5 21.5

��INDONESIAN POWER SECTOR

Composition of electricity sales In GWh

Year

2002 2003 2004 2005 2006

Residential 33,994 35,753 38,588 41,182 43,754

Business 11,845 13,224 15,258 15,980 18,415

Industrial 36,831 36,497 40,324 42,453 43,615

Other 4,419 4,967 5,927 7,417 6,825

Total 87,089 90,441 100,097 107,032 112,609

Customers in 000

Year

2002 2003 2004 2005 2006

Residential 28,903 29,998 31,096 32,171 33,118

Business 1,241 1,310 1,382 1,456 1,655

Industrial 47 47 47 46 46

Other 758 796 841 896 931

Total 30,954 32,151 33,366 34,559 35,751

RUPTL

The Master Plan for Power Supply (RUPTL) is PLN’s development plan. It is reviewed annually. Its objectives are:

Main objectives of the current RUTPL

a. To reduce fuel utilization to 5 percent of the total power production.b. To reduce losses in transmission and distribution networks to less than 10

percent.c. To reduce the contribution of fuel fired power plants to 5%.d. To increase the installed capacity to 36,222 MW in 2010, comprising 26,086

MW in Java-Bali and 10,136 MW in outer islands.e. To achieve interconnection of South-Central Kalimantan system in 2008,

Sumatra system in 2009 and Java system in 2010.f. To achieve an electrification ratio of 70% with 44 million customers.

Diversification Programme of Primary Energy.

The diversification programme of primary energy sources is hampered by the undeveloped supply and transportation of gas. Most of the increased demand will be met by coal-fired power plants and some renewable energy sources.

�� INDONESIAN POWER SECTOR

The main new power plants will be:

The diversification programme of primary energy sources is hampered by the undeveloped supply and transportation of gas. Most of the increased demand will be met by coal-fired power plants and some renewable energy sources.

The main new power plants will be:

a. The accelerated programme: large coal fired power plants in Java-Bali and small to medium scale plants in outer islands for a total of 10,000 MW.

b. Geothermal plants, amounting to 400 MW in different locations.c. Repowering of Muara Karang plant (740 MW), extension of Priok plant (740

MW), construction of Muaratawar plant (225 MW).d. Construction of a combined cycle plant (5x740 MW) using LNG in

Bojanegara.e. Pump storage plant at Cisokan (4x250 MW)f. New IPP projects

Additional Power Capacity

Description 2006/07 2007/08 2008/09 2009/10 2010/11 Total

Outer Island of Java

Hydro PP 292 120 49 180 641

Diesel PP 20 79 8 10 116

Gas Fired PP 80 338 173 279 35 905

Combined Cycle PP 190 150 4 161 505

Micro Hydro PP 8 39 2 5 54

Geothermal PP 26 30 5 250 311

Description 2006/07 2007/08 2008/09 2009/10 2010/11 Total

Steam Fired PP 180 100 1,528 1,393 864 4,065

Sub Total 552 803 2,047 1,691 1,505 6,597

Java - Bali

Gas Fired PP 0 0 0 0 0

Combined Cycle PP 740 50 0 0 0 790

Geothermal PP 0 110 0 170 190 470

Steam Fired PP 1,920 0 0 3,430 2,960 8,310

Sub-Total 2,660 160 0 3,600 3,150 9,570

Total 3,212 963 2,047 5,291 4,655 16,167


DEVELOPMENT OF SUPPLY SYSTEM 2006-2010

Additional Transmission Plan

System 2006 2007 2008 2009 2010 Total

Java-Bali

T/L500 kV 1,403 9 165 333 462 2,373

T/L 150 kV 484 1,499 2,010 2,239 367 6,598

T/L 70 kV 34 82 116

Sub-Total 1,887 1,542 2,175 2,654 829 9,087

Outside Java-Bali

T/L 275 kV 1,460 1,460

T/L 150 kV 964 616 2,728 2,342 2,706 9,355

T/L 70 kV 112 110 127 105 454

Sub-Total 1,076 726 2,855 3,802 2,811 11,269

System 2006 2007 2008 2009 2010 Total

Indonesia

T/L 500 kV 1,403 9 165 333 462 2,373

T/L 275 kV 1,460 1,460

T/L 150 kV 1,448 2,115 4,738 4,581 3,073 15,953

T/L 70 kV 112 144 127 82 105 570

Total 2,963 2,268 5,030 6,456 3,640 20,356

PROJECTION OF FUEL MIX ANF FUEL DEMAND

The strategy in the plan to utilize primary energy up to 2010 is based on:

Fuel

In the review of RUPTL, the share of fuel usage will gradually decrease to reach 5% in 2010.

Coal

Domestic coal composition is estimated at 57,482 million tons. 30,167 million ton and 27,390 million tons are located in Kalimantan and Sumatera respectively. Most of the coal resources are low-grade, with 4,800 kcal/kg of heat content in average.

Gas and LNG Terminal

The gas supply crisis will be mitigated by the construction of gas terminals.


Hydropower

The development of hydropower faces the obstacles of land acquisition and relatively long development periods.

Geothermal

To accelerate the development of geothermal, regulations need to be improved in order to reduce the cost of steam.

Type of Energy Unit 2006 2007 2008 2009 2010 Total

Java Bali

Fuel 10^3 kl 5616 2296 3323 2501 462 14,198

Gas BScf 183 231 258 253 186 1111

Coal 10^3 ton 24295 28940 29273 34256 45513 162277

Geothermal GWh 6400 7341 7428 8780 10179 40128

Outer Islands of Java

Fuel 10^3 kl 3,468 2,865 1,557 905 856 9,651

Gas BScf 44 65 55 43 16 223

Coal 10^3 ton 1,668 2,475 5,661 8,659 10,720 29,183

Geothermal GWh 140 301 199 389 1,955 2,984

Indonesia

Fuel 10^3 kl 9084 5161 4880 3406 1318 23849

Gas BScf 227 296 313 296 202 1334

Coal 10^3 ton 25963 31415 34934 42915 56233 191460

Geothermal GWh 6540 7642 7627 9169 12134 43112

PROJECTION OF INVESTMENT DEMAND

Table of Investment Demand for Power Plant, Supply and Distribution (Normal Option)

Year Power Plant T/L Relay Station Distribution Total

2006 0 445 225 385 1,055

2007 60 299 347 442 1,148

2008 670 409 363 483 1,925

2009 3,926 1002 451 552 5,931

2010 3,685 1004 380 542 5,611

Total 8,341 3,159 1,766 2,404 15,670


Table of Investment Demand for Power Plant, Supply and Distribution (Low Option)

Year Power Plant T/L Relay Station Distribution Total

2006 0 445 222 385 1,052

2007 60 299 334 442 1,135

2008 670 409 353 483 1,915

2009 3,071 1,002 440 552 5,065

2010 3,685 1,004 372 542 5,603

Total 7,486 3,159 1,721 2,404 14,770

RENEWABLE ENERGY

Source Potential (MW) Installed (MW)

Hydro 75.647 3.854

Mini/Microhydro 460 64

Biomass 49.907 302

Geothermal 19.658 820

Solar Energy 1.203.000 5

Wind Energy 9.287 0,5

Nuclear 32.000

Energy Mix 2005

Source %

Fuel 54,4

Gas 26,5

Coal 14,1

Geothermal 1,4

PLTA 3,4

Renewable Energy 0,2

Energy Mix 2025

Source %

Fuel 26,2

Gas 30,6

Coal 32,7

Geothermal 3,8

PLTA 2,4

Renewable Energy 4,4


IPP DI SUMATRA

OPERATION

No. PROJECTCAPACITY

(MW)DEVELOPER CATEGORY STATUS COD

1 PLTGU Palembang Timur

150 PT. Asrigita Prasarana Ex. 27 IPP Operasi Sept 2004

2 PLTG Gn. Megang 2 x 40 PT. Meppo-Gen Program Kemitraan Operasi Nov 2007

DEVELOPMENT

No. PROJECTCAPACITY

(MW)DEVELOPER CATEGORY STATUS

PLANNING COD

1 PLTA Asahan 1 2 x 90 PT. Bajra DSN Ex. 27 IPP EPC ± 5,23% Mar. 2010

FINANCING

No. PROJECTCAPACITY


PLANNING COD

1 PLTU MT Banjarsari 2 x 100 PT. Bukit Pembangkit innovative

Program Kemitraan Process Financing End 2009

2 PLTU Sibolga A 2 x 100 PT. Tenaga Listrik Sibolga

Ex. 27 IPP Process Financing Sept. 2012

3 PLTU Kuala Tanjung 2 x 112,5 PT. Renyza Energi Daerah Krisis Process Financing End 2010

4 PLTU Banyuasin 2 x 112,5 PT. Banyuasin Power Energi

Daerah Krisis Process Financing End 2010

5 PLTP Salura 330 Kons.Medco - Ormat Itochu

Ex. 27 IPP Sign PPA 30 Oct ‘2007

Sept. 2010

6 PLTU Baturaja 2 x 100 PT. Priamanaya Mulut Tambang Sign PPA 30 Oct 2007

Sept. 2010

IPP DI JAMALI / NTB / NTT

EVALUATION PROPOSAL / SYSTEM STUDY

No. PROJECTCAPACITY


1 PLTU Karangasem 2 x 200 PT. Truba Manunggal Daerah Krisis Proposal Unsolicited

- -

2 PLTU Karangasem 2 x 200 PT. Bhumi Agung Listrindo

Daerah Krisis Proposal Unsolicited

- -

3 PLTU Cilacap 3 & 4 (Ekspansi)

1 x 600 PT. Sumber Segara Primadaya

Ekspansi Waiting for Developer’s

Proposal

- 2011

4 PLTU Serang 2 x 300 PT. Power Jawa Barat Ex. 27 IPP - Mid 2013

5 PLTU Jawa Tengah 2 x 600 - Insfrastructure Summit

Model PPP - 2015


IPP DI SUMATRA

FINALISE PPA

No. PROJECTCAPACITY


PLANNING COD

1 PLTU MT-Kalsel 2 x 65 PT. Indo Ridlatama Power

Partnership Programme

Tunggu Rekomendasi

Dekom IP

Mid 2010

NEGOSIASION TENDER

No. PROJECTCAPACITY


PLANNING COD

1PLTU Kalimantan Timur 2 x 60 - Infrastructure Summit

Evaluation A & T Proposal Mid. 2010

FINANCING

No. PROJECTCAPACITY


PLANNING COD

1 PLTU Penajam 2 x 60 PT. Nusantara Power Energi

Mulut Tambang Proposal Unsolicited

- -

IPP DI SULAWESI & INDONESIA TIMUR

OPERATION

No. PROJECTCAPACITY


1 PLTGU Sengkang 135 PT. Energi Sengkang Ex. 27 IPP Operasi March 1999

2 PLTD Pare Pare 6 x 10,37 PT. Makassar Power Ex. 27 IPP Operasi Mei 1998

FINANCING

No. PROJECTCAPACITY


PLANNING COD

1 PLTU Amurang 2 x 55 PT. Tenaga Listrik Amurang

Ex. 27 IPP Process Financing Mid. 2012

2 PLTU Jeneponto 2 x 100 PT. Bosoa Energi Daerah Krisis Process Financing Sept. 2010

3 PLTA Poso 195 PT. Poso Energi Energi Terbarukan Sign PPA 30 Oct 2007

Mid. 2009


IPP IN SULAWESI & EASTERN PART OF INDONESIA

FINALISE PPA

No. PROJECTCAPACITY

(MW)DEVELOPER CATEGORY STATUS STARTING

1 PLTU Minahasa 2 x 55 PT. Bumi Mitra Trans - YTL

- Finalise PPA -

NEGOSIASION TENDER

No. PROJECTCAPACITY


1 PLTU Takalar 2 x 60 PT. Mutiara Situju - Postponed - -

FINANCING

No. PROJECTCAPACITY


1 PLTU Penajam 2 x 60PT. Nusantara Power Energi Mine Mouth

Unsolicited Proposal - -

IPP IN SUMATRA

PROPOSAL UNDER EVALUATION

No. PROJECTCAPACITY


1 PLTGU Palembang Timur

1 x 150 PT. Asrigita Prasarana Ekspansi

Expansion Study Apr. 2010

2 PLTU Cerenti 2 x 150 PT. Pembangkit Energi Baru

Mine Mouth Negotiation Mid. 2011

3 PLTU Arahan 2 x 600 PT Mitra Jaya Mine Mouth Extension of MOU Mid. 2015

4 PLTU OKU Timur 2 x 100 Cons.PJB & Hanson Intl. tbk

Mine Mouth Unsolicited Proposal

- 2015

5 PLTU Banda Aceh 2 x 50; 1 x 100

PT. Potensi Bumi Power

- Unsolicited Proposal

- -

6 PLTU Banda Aceh 2 x 100 System Protection and Maintenance Sendirian Berhad Maaysia


- -

7 PLTU Bangko Barat 2 x 600 Bumi Resources Mine Mouth Unsolicited Proposal

- -

8 PLTU Indragiri 2 x 300 Kons.Ridiatama & Arab Gulf

Mine Mouth Unsolicited Proposal

- -

9 PLTU MT Sumbagsel 4 x 100 PT. Rajawali Koresia Mine Mouth Unsolicited Proposal

- -

10 PLTU Brayan Sumsel 2 x 125 Kons.Jindal Stainless- Mine Mouth Unsolicited Proposal

PT.Brayan Bintang Tiga Energi

- -

11 PLTU Merapi 2 x 200 GARVOX Mine Mouth MoU - -

12 PLTU Paluh Merbau/Belawan

2 x 150 PT. Gregory Energy - Unsolicited Proposal

- -

13 PLTU MT Pendopo 2 x 600 PT. Deha Power Mine Mouth Unsolicited Proposal

- 2011

14 PLTU Batanghari Jambi

2 x 100 PT. Sumber Energi Batanghari


- 2011


IPP IN SUMATRA

FINALISE PPA

No. PROJECTCAPACITY


1 PLTU Simpang Belimbing

2 x 100 PT. Energi Musi Makmur

Mine Mouth Finalise PPA2010/11

NEGOTIATION/TENDER

No. PROJECTCAPACITY


1 PLTU Kambang 2 x 100 PT. Inti Energi Abadi Mine Mouth Unsolicited Proposal

-

2 PLTU Musi Rawas 2 x 600 PT. Sojits, Tribayu Buana

Mine Mouth Negotiation Mid. 2012 ( Unit 1)

3 PLTA Merangin/ Kerinci

350 PT. Para Inti Energy Renewable Energy Negotiation Sept. 2013

4 PLTU Sumatera Utara 2 x 100 - Insfrastructure Summit

Bidding -

5 PLTU Tarahan 2 x 135 PT. Indonesia Power Mine Mouth Beginning Process Mid. 2011

6 PLTU Bangko Tengah 4 x 600 Cons. PT.BA-China-Huadian-PLN

Mine Mouth Negotiation Mid. 2012 ( Unit 1)

7 PLTU Bayung Lencir 2 x 150 Cons. PT.Manggala EW

Mine Mouth Negotiation 2013

8 PLTU Sungai Lilin 2 x 100 PT. Petromuba Mine Mouth Negotiation 2013

9 PLTU Aceh Barat 2 x 200 PT. Aceh Energi Utama - MoU -

IPP IN JAVA-MADURA-BALI

IN OPERATION

No. PROJECTCAPACITY


1 PLTP Salak Unit 4, 5 & 6

3 x 55 Chevron Geothermal Indonesia

Ex. 27 IPP Operation Oct. 1997

2 PLTGU Cikarang 150 PT.Cikarang Listindo Ex. 27 IPP Operation Dec. 1998

3 PLTP Darajat Unit 2 1 x 90 Chevron Geothermal Indonesia

Ex. 27 IPP Operation Feb. 2007

4 PLTP Wayang Windu Unit 1

1 x 110 Magma Nusantara Ltd. Ex. 27 IPP Operation Jun. 2000

5 PLTU Paiton 1 2 x 615 PT. Paiton Energi Company

Ex. 27 IPP Operation Jul. 2007

6 PLTU Paiton 2 2 x 610 PT. Jawa Power Ex. 27 IPP Operation Nov. 2000

7 PLTU Cilacap 2 x 281 PT. Sumber Segara Primadaya

Ex. 27 IPP Operation Feb. 2007

8 PLTP Darajat Unit 3 1 x 110 Chevron Geothermal Indonesia

Expansion Operation Aug. 2007

�0 INDONESIAN POWER SECTOR

UNDER DEVELOPMENT

No. PROJECTCAPACITY


PLANNING COD

1 PLTP Wayang Windu Unit 2

1 x 110 Magma Nusantara Ltd. Expansion EPC 75% Mar. 2009

2 PLTP Bedugul 3 x 55, 1 x 10 Bali Energi Ltd. Ex. 27 IPP Under discussion 2009

IPP IN JAVA-MADURA-BALI

UNDER FINANCING

No. PROJECTCAPACITY


1 PLTP Salak Unit 7 & 8 2 X 65 Chevron Geothermal Indonesia

Expansion Financing under negoitation

-

2 PLTU Culukan Bawang

2 x 125, 1 x 130

PT.General Energi Bali Crisis Area Financing under negoitation

Early 2011

3 PLTP Patuha 3 x 60 Geodipa Energi Ex. 27 IPP Financing under negoitation

2011

4 PLTU Cirebon 1 x 660 Cons.Marubeni-Astra Infrastructure summit PPA signed 20 Aug 2007

Mar. 2011

NEGOITATION

No. PROJECTCAPACITY


1 PLTU Anyer 1 x 300 PT. Intidaya Prima Kencana & Lestari Listrik Pte. Ltd.

- Finalise PPA Mid. 2011

TENDER / NEGOTIATION

No. PROJECTCAPACITY

(MW) DEVELOPER CATEGORY STATUS STARTING

1 PLTU Madura 2 x 100 PT. Madura Energi Crisis Area Negotiation2011

2 PLTG Cikarang 1 x 150 PT. Cikarang Listrindo Expansion Negotiation Early 2010

3 PLTU Bali 2 x 100 - Infrastructure Summit Postponed --

4 PLTU Paiton Ekspansion

1 x 800 - Expansion Mid. 2011

5 PLTU Tj. Jati B 2 x 660 PT. Sumitomo Corp. Expansion Negotiation Completed

Mid. 2012

6 PLTU Tj. Jati A 2 x 660 PT. Tj. Power Company

Expansion Negotiation Mid. 2015


Annex 3

Institutional, legal and regulatory framework

The institutional set-up

Under the Coordinating Minister of Economic Affairs (CMEA), the key central government actor in the development of electricity is the Ministry of Energy and Mineral Resources (MEMR), through its Directorate General of Electricity and Energy Utilization (Direktorat Jenderal Listrik dan Pemanfaatan Energi, DGLPE). MEMR is the main policy making body for electricity. It is responsible for developing the electricity master plan and preparing laws and regulations related to electricity. MEMR establishes national tariff policies and formulates the subsidy policies. It issues business licenses in the electricity industry.

Based on the Decentralisation Law of 2004, sub-national governments have a mandate to participate in the planning of electricity provision, to issue business licenses and to define tariffs that are outside the national electricity network.

Other government bodies involved in the power sector include the Planning Ministry (BAPPENAS) and the Ministry of Finance (MoF). With regard to private sector involvement in electricity, the CMEA and BAPPENAS, through the KKPPI (Committee for the Acceleration of Infrastructure Provision), and the MoF play a particular role in selecting projects and in providing government support.

Legal and regulatory framework

The legal and regulatory framework for electricity remains in a transition period. The current legal basis for electricity in Indonesia is Law 15 of 1985 which was re-instated as the applicable law after a new law, Law 20 of 2002, was annulled by the Constitutional Court in December 2004. The new law aimed at providing a long-term vision for developing the power sector in a financially and environmentally sustainable manner by relying on competition (where feasible and gradually to avoid disruption), modern regulation, regionalisation and private sector involvement.

However, the Constitutional Court deemed that the new law was in contradiction with Indonesia’s Constitution, in particular with Article 33 that mandates the State to control production facilities that are vital to the people.

Following the annulment of Law 20/2002, the government issued Government Regulation 3/2005 and Ministerial Regulation 10/2005 to improve the implementation of the old law 15/1985, in particular to take into account the law on decentralisation of 2004.


Main provisions of Law 15/1985 and subsequent Government Regulations

The Minister of Energy and Mineral Resources (MEMR) determines the policy and planning for the provision of electricity.

The main Electricity Business Authority (Pemegang Kuasa Usaha Ketenagalistrikan or “PKUK”) is given to the state-owned company PLN ( PT. Perusahaan Listrik Negara). This provision gives PLN a wide mandate to provide integrated electricity services throughout Indonesia.

Electricity Business Licenses for Public Provision (IUKKU) for the provision of electricty outside the national transmission network may be obtained by public and private service providers other than PLN. An IUKKU license is given by the level of government that has jurisdiction over the supply area. This level of government is also responsible for overseeing the operations of the licensed operator and for setting tariffs.

Electricity Business License for Self Provision (IUKKS) : Public and private entities can obtain licenses from the relevant levels of government to provide electricity for their own use. In principle, such licenses can only be granted when PLN or other licensed operators are not present or do not provide reliable services.

Conditions for Foreign Participation

Presidential Regulation 77/2007 was issued to complement the capital investment law (law 25/2007) issued in April 2007 and to specify the lines of business which are closed for investment and those which are subject to conditions, in particular limitations of foreign capital ownership. With regard to the power sector, it stipulates that foreign shareholding is limited to 95% in the production, transmission and distribution of electricity.

The energy law

The Government issued a new Energy Law, which is expected to serve as guiding principles for the entire energy sector.

The law on energy is aimed at securing sustainable energy supplies and promoting energy conservation and the use of renewable energy resources.

It sets out broad policies for the development of the energy sector. It will complement existing energy-related laws including the 2003 Geothermal Law, the 2001 Oil and Gas Law and the 1997 Nuclear Energy Law.

The new law mandates the establishment of a National Energy Board, chaired by the President, which will draft a national energy policy and oversee developments in the energy sector.


The law stipulates that a strategic reserve in conventional fossil fuels and renewable energy resources will be maintained.

The law also stipulates the development of renewable energy resources and the promotion of efficient use of energy, through pricing mechanisms and incentives.

The establishment of the National Energy Board, as well as the incentives and other support measures will be specified in further government regulations.

The new electricity law

The draft of a new law has been submitted to the Parliament. It should establish a distinction between PLN’s commercial operations and its Public Service Obligations (PSO) activities. It is also planned that a regulatory body be set up, and that some competition be allowed in the electricity sector.

Presidential Regulation 67/2005 on “Cooperation between the Government and Enterprises in Infrastructure Provision”.

Perpres 67 sets out the general framework for private sector participation in infrastructure development in Indonesia. Its main provisions are the following:

- Purposes of co-operation: to provide private funding for infrastructure development, to improve the quantity, quality and efficiency of services through healthy competition, to improve the quality of management and maintenance in infrastructure provision, to develop the use of the principle of “the user shall pay for the services received” whilst taking into account the user’s financial condition.

- Types of infrastructure concerned: transportation consisting of seaports, river or lake ports, airports, railway network and stations; road infrastructure consisting of toll roads and toll bridges; water infrastructure consisting of raw water carrying channels; drinking water infrastructure consisting of raw water extraction facilities, transportation and distribution networks, water processing plants; waste water infrastructure consisting of water treatment plants, networks and disposal facilities; telecommunications infrastructure consisting of telecommunications networks; electricity infrastructure consisting of electricity generators, transmission and distribution networks; petroleum and natural gas infrastructure consisting of processing, storage, transportation and distribution facilities.

- Co-operation will be based on the principles of fairness, openness, transparency, competition, accountability, mutual benefit, mutual need and mutual support.

- The government will identify co-operation projects based on their conformity with national/regional development plans and on cost-social benefit analyses. Project proposals will include a pre-feasibility study, cooperation modalities


and means of financing. Project proposals will be subject to public consultation. Following the identification of projects, the government will establish and publish a prioritised list of projects.

- Unsolicited project proposals are acceptable, provided they comply with the requirements (feasibility study and project development plans). If a proposal is considered by the government to be worthy of implementation, it will be awarded through a competitive tender. However, compensation will be given to the company submitting the unsolicited proposal in the form of additional value (bonus) of up to 10 percent in the tender evaluation or by financial compensation from the government or the tender winner. The compensation will be decided by the government based on the recommendation of an independent appraiser.

- Preliminary tariff and regular tariff adjustments will be set to ensure cost recovery and a reasonable profit for the investor over time. In projects that are socially and economically justified, but where tariff rates cannot be fully covered by users, the government may provide compensation (subsidy) to the private investor/operator.

- The allocation of risks between the government and the private partner will be set out in the Cooperation Agreement. The government (Ministry of Finance or Head of the Regional Finance Department) may provide support to the private partner in relation to certain risks.

- The government will select its private partner in the framework of a cooperation agreement through a tender. The detailed procurement procedure is attached to the Perpres.

- The Cooperation Agreement between the government and the private partner will include the scope of work, its term, the performance bond, the applicable tariff and mechanism of adjustment, the rights and obligations of parties including the risk allocation, the definition of service performance and other provisions including the termination clause and dispute settlement mechanism, with the governing laws, namely the laws of Indonesia. It is also specified that the private partner must have completed the financing for the project within 12 months after signing the Cooperation Agreement.

Ministry of Finance Decree 38/PMK/2006 on Technical Directives for Controlling and Managing Risks of Infrastructure Development

The Ministerial Decree defines the terms and conditions of government support for PPP projects. Under this regulation, the government is permitted to offer financial or other forms of compensation to private enterprises participating in infrastructure projects.

Compensation may be granted for three types of project risk:


- Political risk: risks arising from unilateral government action and inflicting significant financial loss on the enterprise in relation to government acquisition of assets, amendments to legislation, restrictions on conversion of currency and prohibition on repatriation of funds. The mechanism and amount of compensation in respect of political risk will be as agreed by the government and the private enterprise in the project agreement.

- Project performance risk: risks to the completion of the project including delay in, or increased costs of, land acquisition and changes by the government in project specification. Where the delay in acquiring the land is due to the government’s responsibility; there is an unanticipated increase in land prices; there is a delay in the “stipulation of operations”; or there are changes to the agreed tariff arrangements, the government may extend the concession period or grant other forms of compensation.

- Demand risk: risk to achieving project revenue as a result of lower than expected demand. Where the realised revenue of the project is less than the minimum revenue guaranteed by the government, as a result of lower than agreed demand, the government may provide financial or other forms of compensation to the private enterprise. Where the realised revenue is higher than the revenue guaranteed by the government due to higher than expected demand, the government will receive the financial benefit of the higher revenue.

Regulation 38/2006 provides that government support may be granted to a proj-ect if it is in accordance with current legislation, if it meets the required standards of technical and financial feasibility and if the costs and fiscal risks arising from such support do not exceed the capability of the state budget to bear such sup-port.

Before the government will grant support to a project, the details of the support proposal must be evaluated and declared feasible by the KKPPI and then passed to the Risk Management Unit of the MoF for evaluation and recommendation to the Minister of Finance. If it approves the proposal, the MoF will specify the terms and conditions of government support consisting of the effective period of sup-port, the risk sharing scheme involving the private enterprise, insurance compa-nies and /or other financial institutions and other possible risk control alternatives based on applicable laws and regulations.

Based on MoF’s approval for government support, a request for allocation of funds will be approved by the Parliament for inclusion in the state budget law before the government can launch the tender process to select the private enterprise. The tender results will be validated by the MoF before it issues its final approval for government support.

EUROPEAN BUSINESS CHAMBER OF COMMERCE IN INDONESIAWorld Trade Centre 8th FloorJl. Jend. Sudirman Kav. 29-31, Jakarta 12920Tel. (62-21) 521-1650Fax. (62-21) [email protected]

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