Indonesia delays closing on controversial Japan-funded power plant

Sunday 12 October 2014

Date: 7 October 2014

Type: News

Source: Global Post

Keywords: Coal power plants

The Indonesian government has pushed back the deadline for getting financial support from an Indonesia-Japan consortium for a controversial $4 billion thermal power plant project by one week while it works to finalize negotiations on land acquisition, a government official said Tuesday.

"The financial closing has been extended by one week as we are in the process of finalizing the negotiations between PLN (the State Electricity Company) and PT BPI," Luky Eko Wuryanto, deputy minister for infrastructure and regional planning at the Office of the Coordinating Minister for the Economy, told Kyodo News without elaboration.

PT BPI stands for PT Bhimasena Power Indonesia, an Indonesian company established for the 2,000-megawatt power plant project with Japanese investment.

The coal-fired power plant project, meant to supply electricity to 13 million people in Central Java Province, has been promoted by a Japanese consortium formed by the Japanese government-linked Electric Power Development Co. and Japanese trading house Itochu Corp.

Construction of the power plant, one of the biggest of its kind in Southeast Asia, was initially slated to start in 2012, with commercial operation expected by 2016. But land acquisition for the project, initially scheduled to be completed by October 2012, has been delayed due to local concerns on its environmental impact.

The company claimed it has received approval of its environmental impact assessment.

Luky said during a recent interview with Kyodo that eight more hectares of land are needed to develop the project, which requires 226 hectares of land straddling three subdistricts in Batang Regency.

"If we can acquire 226 hectares, it will be ideal, but if we can’t, 205 is okay," Luky said. But he added 197 hectares of land have so far been acquired and 15 families still refuse to give up their land.

Luky stressed the importance of the project both for Indonesia and Japan.

"By 2018, we will face an energy crisis if we are not able to somehow implement this project. The Japanese government is concerned about this as it will affect Japanese companies as well," he said.

In July, the consortium declared force majeure over the construction of the project, citing "the instability of the situation at the site."

But the company also expressed commitment to ensure the continuation of the project and pledged to continue discussions with landowners who are holding out.###

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