Indonesia: MEMR Announces 35,000MW Power Plant Construction Program

Last Updated: 15 February 2016
Article by Arfidea D. Saraswati and Filza Adwani

Launching of the 35,000 MW Power Plant Construction Program
MONDAY, MAY 04, 2015 12:48 WIB

NUMBER: 25/SJI/2015
Date: May 4, 2015


The President of the Republic of Indonesia, Joko Widodo, along with the Minister of Energy and Mineral Resources (MEMR), Sudirman Said, on Monday (4/5) launched the 35,000 MW Power Plant Construction Program in Samas, Bantul Regency, Special Region of Yogyakarta Province. This 35,000 MW Program is a leading program to achieve one of President Jokowi's 9 Priority Agenda items ("nawacita"), which is to realize economic independence by stimulating strategic sectors, particularly energy sovereignty.

Launching of the 35,000 MW Power Plant Construction Program is the government's commitment in responding to the issues of the nation and the state to create energy sovereignty. Launching of this program was marked by the execution of Power Purchase Agreements (PPA) and Letter of Intent (LoI) for the Engineering, Procurement and Construction (EPC) as well as Groundbreaking for some power plants. Those schemes will be undertaken for these power plants:

  1. Execution of PPA of Wind Power Plant (PLTB) Samas (Yogyakarta), with capacity of 50 MW;
  2. Execution of PPA of Steam Power Plant (PLTU) Kendari-3 (Southeast Sulawesi), with capacity of 2 x 50 MW;
  3. Execution of PPA of Wind Power Plant (PLTB) Samas (Yogyakarta), with capacity of 50 MW;
  4. Execution of PPA of Steam Power Plant (PLTU) Kendari-3 (Southeast Sulawesi), with capacity of 2 x 50 MW;
  5. Execution of PPA of PLTU Jeneponto Ekspansi (South Sulawesi), with capacity of 2×125 MW;
  6. Execution of PPA of Hydro Power Plant (PLTA) Malea (South Sulawesi), with capacity of 2×45 MW;
  7. Execution of LoI for EPC PLTU Grati (East Java) with capacity of 450 MW;
  8. Groundbreaking of PLTA Jatigede (West Java) , with capacity of 2 x 55 MW;
  9. Groundbreaking of PLTU Takalar (South Sulawesi), with capacity of 2 x 100 MW.
  10. Groundbreaking of PLTU Pangkalan Susu unit 3 and 4 (North Sumatera), with capacity of 2 x 220 MW;

In the same scope, Natural Gas Sale and Purchase Agreements (PJBG) were executed for electricity projects, as follows:

  1. PJBG between Conoco Phillips Grissik Ltd. and PT. PLN with contract period of 3 (three) years and revenue for the government in the amount of US$ 201 million.
  2. Amendment of PJBG between Petroselat and PT.PLN with contract period of 5 (five) years and revenue for the government in the amount of US$ 15.7 million.
  3. HoA between Petrochina and PT. Bumi Samudra Perkasa with contract period of 7 (seven) years and revenue for the government in the amount of US$ 82.6 million.

PLTB Samas and PLTA Jatigede are expected to be able to increase the total supply of 120 MW until the end of 2019 to strengthen the Jawa-Bali system. PLTU Kendari, PLTU Takalar, PLTU Jeneponto and PLTA Malea with an additional 640 MW total supply are expected to increase supply in the Sulawesi system. Currently, the electricity system in Sulawesi is one of the systems which has the most rapid growth. Whereas PLTU Pangkalan Susu unit 3 and 4 are intended to strengthen the Sumatera system, which is currently interconnected and being made to increase its interconnection capacity, planned to be completed in 2017. These electricity infrastructure projects will boost investment opportunities and economic growth in those areas and will also directly create job opportunities.

To succeed in the 35,000 MW program, the Government encourages the role of the private sector to participate in the electricity supply business through EPC projects; Independent Power Producer (IPP) scheme; Public Private Partnership (PPP); Build, Lease and Transfer; and Private Power Utility (PPU) or stipulation of business areas.

The Government has issued regulations to encourage and provide certainty for private investment. Related to the freeing up and procurement of land, the Government promulgated Law No. 2/2012. To speed up licensing, the Government formed the One Stop Integrated Service (PTSP) which is coordinated by BKPM.

The Government also issued MEMR Regulation Number 03 of 2015 Regarding Power Purchase Procedures and Benchmark Prices for Power Purchase from Mine Mouth Power Plants, Coal-fired Power Plants, Gas Power Plants (PLTG)/ Gas Machine Power Plants (PLTMG) and Hydropower Plants (PLTA) by PT PLN (Persero) through Direct Selection and Direct Appointment. This regulation was created to build a more conducive investment climate, accelerate the price approval procedure between PLN and IPPs, and to guarantee certainty/assurance for PLN in the execution of electric power purchase.

As we all know, in the next five years, Indonesia needs at least 35,000 MW of additional electricity- excluding the existing power plant projects of approximately 7,000 MW that are currently under construction. If the realistic economic growth of around 5-6% per year is taken into account, then throughout 2015-2019, the average annual capacity required is 7,000 MW.

The nature of energy is the driving force for socio-economic growth. Not only for the industry and investment, but also for job opportunities and uptake of domestic components. Not less than 650,000 direct workers and 3 million indirect workers will benefit. Meanwhile, the uptake of domestic components is expected to reach 40%, which is equivalent to 440 trillion Rupiah.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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