Indonesia expands government guarantees for geothermal projects
Lahendong Unit 2 plant Sulawesi, Indonesia (source: aecom.com)
Alexander Richter
23 Feb 2012
The Indonesia Finance Ministry and Energy and Mineral Resources Ministry have agreed to expand government guarantees that until now only guaranteed payments for the purchase of electricity, but will now also cover risks during the exploration and construction phases.
In exciting news from Indonesia it is reported that the government has finally agreed to provide expanded guarantees to geothermal developers in the country.
Under the new rules, developers will “enjoy full protection of their investments as the government agrees to expand its guarantee to cover risks during exploration and construction phases.
Under the current rule, the government would only cover payments for purchases of electricity by PT Perusahaan Listrik Negara (PLN) should the state-run power company be unable to fulfil its financial commitments to private electricity producers (IPP).
Geothermal developers say such a guarantee is not enough, demanding protection to investments made during the exploration and construction of geothermal power plants.
Bagiyo Riyawan, PLN director for strategic procurement, reported on Wednesday that a meeting between decision makers representing the Finance Ministry and the Energy and Mineral Resources Ministry had agreed to expand the government guarantee.
“The remaining disagreement between the government and contractors is only in the guarantee period,” he told a press conference after the opening of the first Green Energy Forum at the Cirata hydro power plant in Purwakarta, West Java.
“There are still two opinions on that matter [the guarantee period] — whether the guarantee will last until the contract with IPPs has ended, or only until they pay back their debts to lenders,” he added.
The government would not need to issue a new regulation for the guarantee expansion, Bagiyo said. A supporting letter given to contractors would be enough for developers to seek financial back-up for the projects, he added.
PLN renewable energy division head Muhammad Sofyan revealed the new guarantee scheme would be more specific than what is stipulated in the ministerial regulation.
Under the new scheme, guarantees for explorations will be regulated. If there is a government force majeur (a project stopped by the government), there will be an audit by an independent body to calculate the amount of funds that have been used by a developer during the exploration period.
“The government will pay back that amount of money. Once the new scheme is legalized, we can proceed to sign stalled power purchase agreements [PPAs] with geothermal developers,” Sofyan said.
Due to the guarantee problems, PLN estimated earlier that by 2014, the country could only have an additional power supply of 1,200 megawatts (MW) from geothermal power plants, roughly half of the 10,000 MW fast-track program’s second phase target of 2,170 MW.
Despite having 40 percent of the world’s geothermal reserves, Indonesia can only produce 1,341 MW or 4.6 percent of its potential.
PLN announced in January that three geothermal power plants would go online this year with a combined capacity of 135 MW. The plants are Lahendong Unit 4 in North Sulawesi, Ulubelu Unit 3 and 4 in Lampung and Ulumbu in East Nusa Tenggara.
The last time PLN signed PPAs with geothermal developers was March last year for five power plants. The plants are Mulut Balai (4×55 MW) in South Sumatra, Ulubelu Unit 3 and 4 (2×55 MW) in Lampung, Lahendong Unit 5 and 6 (2×20 MW) in North Sulawesi, Karaha (1×30 MW) in West Java and Kamojang Unit 5 in West Java (1×30 MW).”
Source: The Jakarta Post
