Posted by: mel | February 11, 2009

Indonesia Power Projects may be Hit by Financing Delays

JAKARTA, Feb 10 (Reuters) – Indonesia’s efforts to tackle a power shortages by increase its electricity generating capacity may face delays because of problems with financing, the head of the state-owned electricity firm said on Tuesday.

PT Perusahaan Listrik Negara, or PLN, has so far secured a total of $5.5 billion in funding for the government’s crash programme to build a 10,000-megawatt coal-fired project.

A significant proportion of the funding has come from Chinese lenders who now want to charge a higher interest rate because of the global credit crisis. As a result, PLN may have to renegotiate financing terms, PLN executive Fahmi Mochtar said.

“They want a higher interest rate for some of the financing commitment that we have signed and also for future financing, which is still being negotiated,” Mochtar told reporters.

“Construction work depends heavily on financing, so a delay in financing may hamper construction work,” he said.

Mochtar did not elaborate on which power plant projects would be affected by any delays.

About 1,000 MW generating capacity is due to come onstream this year while around 7,000 MW of generating capacity is planned to come onstream in 2010, and the remainder in 2011.

Out of 35 new power plants that are planned to be built, 32 have been contracted and some are in the construction process, data from the firm shows.

The 10,000 MW coal-fired project will cost around $8 billion in total, PLN has said.

Mochtar said PLN may seek financing from local banks if financing from China is affected.

“It is not a dead-end. We don’t lose hope. We may use local banks but that will be last resort,” he said, adding the government would hold a cabinet meeting and assign Trade Minister Mari Pangestu to help lobby Chinese lenders.

PLN, the monopoly power supplier in Indonesia, has 25,000 MW of generating capacity but daily output is far less because most of its plants are old and inefficient.

Industry officials forecast Indonesia’s power demand will grow around 10 percent a year. Southeast Asia’s biggest economy frequently suffers blackouts as its power grid has a power margin reserve of only about 20 percent, instead of 30 percent to secure supplies.

(Reporting by Fitri Wulandari; editing by Sara Webb)

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