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Uncertainty of contracts with PLN challenging for Indonesian development

Dieng, Banjarnegara, Indonesia (source: flickr/ druidabruxux, creative commons)
Alexander Richter 8 Aug 2011

With the Indonesian government confirming the electricity price to developers, there is no sufficient certainty about contracts with the buying state-run utility PT PLN. This constitutes a challenge to attract much needed investment into the sector.

Indonesia is likely to be the quickest growing geothermal market as of today, but the country also faces difficulties in attracting investors to finance the planned development.

So in a recent interview, “Surya Darma from the Indonesian Geothermal Association’s board of counselors said the government was struggling to attract investment from newly tendered geothermal projects. “It will be hard if the business hasn’t been improved,” he said.

This year, four geothermal project areas are up for bidding, namely Simbolon Samosir, (North Sumatra) and Way Ratai (South Lampung), each with a reserve potential of 150 megawatts. There is also Candi Umbul Telomoyo (Central Java) and Bora Pulu in Sigi, with a potential of 120 and 152 megawatts respectively.

The government could only confirm the electricity price to the developers but there is no certainty regarding contracts with state-run electricity company PT PLN. Several work areas have not signed contracts with PLN. Developers have requested a payment guarantee for the electricity bought.”

Source: TempInteractive