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Cablegate: Indonesia Power Highlights-July 2006

VZCZCXRO1977
RR RUEHCHI RUEHDT RUEHHM
DE RUEHJA #9867/01 2190534
ZNR UUUUU ZZH
R 070534Z AUG 06
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 8338
RHMFIUU/DEPT OF ENERGY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHKO/AMEMBASSY TOKYO 9951
RUEHBY/AMEMBASSY CANBERRA 9798
RUEHBJ/AMEMBASSY BEIJING 3556

UNCLAS SECTION 01 OF 02 JAKARTA 009867

SIPDIS

DEPT FOR EAP/MTS AND EB/ESC/IEC
DEPT PASS OPIC, EXIM, TDA
DOE FOR CUTLER/PI-32 AND NAKANO/PI-42
COMMERCE FOR USDOC 4430

SIPDIS

E.O. 12958: N/A
TAGS: EPET ENRG EINV PREL ID
SUBJECT: INDONESIA POWER HIGHLIGHTS-JULY 2006

1. Summary. On July 5, the Government of Indonesia (GOI)
issued Government Regulation 26/2006, revising provisions
for electricity purchases under the direct appointment
method. On July 18, the Minister of Energy and Mineral
Resources issued Decree 44/2006 for the purchase of power
under the Accelerated Energy Diversification Plan. On July
5, the GOI also issued Presidential Regulation 71/2006
directing state electricity company PLN to accelerate the
development of coal-fired plants. On the same day, the GOI
also issued Presidential Regulation 72/2006 creating the
Coordinating Committee for the Accelerated Development of
Power Plants. On July 24, Jakarta's Muara Tawar power plant
suspended operations due to a lack of fuel. On July 17, the
Cilacap power plant was also down following an earthquake
and tsunami. This report uses an exchange rate of Rp
9,070/USD as of July 31, 2006.

Power Regulation Amended
-------------------------

2. On July 5, the GOI issued Government Regulation 26/2006,
the second amendment to Government Regulation 10/1989 on
Electricity Supply and Utilization. The regulation revises
provisions for the purchase of electricity from independent
power producers. The regulation permits the direct
appointment of electricity producers using renewable energy
sources and those expanding existing facilities. Under the
decree, the Minister of Energy and Mineral Resources will
have the authority to establish the electricity reference
price for directly appointed producers.

3. On July 18, the Minister of Energy and Mineral Resources
issued Decree 44/2006 for the Purchase of Power under the
Accelerated Energy Diversification Program for Coal Fired
Power Plants. The decree establishes three types of
reference prices for electricity produced from non-mine
mouth, coal-fired plants. For contracts denominated in
Rupiah, the maximum price is Rp 520 (USD 0.057) per kwh. For
contracts denominated in US dollars, the maximum price is
USD 0.0495. Alternatively, producers may choose to link
their contract to state electricity company PLN's retail
selling price. In that case, the contracted price is capped
at 70 percent of retail tariff.

Table 1:
Electricity Prices for New Coal Fired Plants
--------------------------------------------- ------
Plant Size Scenario 1 Scenario 2 Scenario 3
(Rp/kwh) (USD/kwh) percent
--------------------------------------------- ------
Up to 25 MW 520 0.0495 70
150 MW to 150 MW 495 0.0475 65
More than 250 MW 485 0.0450 60

Note: Kwh (kilo watt hour)


PLN to Accelerate Development of Coal-Fired Plants
--------------------------------------------- -----

4. On July 5, the GOI also issued Regulation 71/2006
directing PLN to accelerate the development of coal-fired
plants with the goal of adding 10,000 MW of generating
capacity to the national grid by 2009. The GOI also gave
PLN the task of expanding the network of transmission lines
within the next three years. According to the regulation,
PLN must use an open and competitive tender process in
selecting the contractors. However, PLN is permitted to
make direct appointments of contractors when they bring
their own financing to the project. The regulation requires
PLN to submit monthly progress reports to the Ministers of
State-Owned Enterprises, Finance, and Energy and Mineral
Resources.

5. The regulation includes a list of 10 projects in Java and
30 projects outside the Java-Bali grid under the accelerated
development program. On July 10, PLN announced a request
for proposals (RFP) for the 10 power projects on Java.
These projects will add at least 6,900 MW supply to the
Java-Bali grid. According to media reports, Vice President
Jusuf Kalla said that the government is prepared to consider
offering comfort letters to power investors.

JAKARTA 00009867 002 OF 002

Table 2:
List of Tendered Coal Fired Power Projects in Java
--------------------------------------------- ------
Project Name Unit Generator Location
Output(MW)
--------------------------------------------- ------
1 PLTU* 2 Banten 2 300-400 Labuan,Banten
2 PLTU 3 Banten 3 300-400 Tangerang,Banten
3 PLTU 1 Jawa 3 300-400 Indramayu,
Barat West Java
4 PLTU 2 Jawa 3 300-400 Pelabuhan Ratu,
Barat West Java
5 PLTU 1 Jawa 2 300-400 Rembang, Central
Tengah Java
6 PLTU 1 Jawa 2 300-400 Pacitan, East
Timur Java
7 PLTU 3 Jawa 2 300-400 Tuban, East Java
Timur
8 PLTU 1 Banten 1 600-700 Suralaya, Banten
9 PLTU 2 Jawa 1 600-700 Paiton, East
Timur Java
10 PLTU 2 Jawa 1 600-700 Tanjung Jati,
Tengah Central Java

Note: PLTU refers to coal fired plant
Source: PLN

6. Also on July 5, the GOI issued Regulation 72/2006
creating the Coordinating Committee for the Accelerated
Development of Power Plants. Former Director General of
Electricity and Energy Utilization Dr. Ir. Yogo Pratomo was
appointed chairman. The main function of the committee is
to implement the GOI's above-mentioned crash program to add
10,000 MW of generating capacity to the national grid by
2009. The committee's term expires December 31, 2009.

Java-Bali Grid Updates
----------------------

7. On July 24, Jakarta's Muara Tawar power plant suspended
operations due to a lack of fuel. The 840 MW combined cycle
plant was completely shut down for one day and operated at
only 140 MW capacity in the following three days. The Muara
Tawar supply shortage did not cause a power deficit in the
Java-Bali grid, but only because PLN initiated rotating
blackouts throughout the greater Jakarta area. Lack of fuel
has been a persistent problem for the Java-Bali grid in the
past few months, which industry analysts say highlights the
need for better coordination between PLN and Pertamina.

8. On July 17, the Cilacap power plant was also forced to
shut down following an earthquake and a tsunami in
Pangandaran, West Java. The plant, which came online in May
2006, resumed operations the next day after a PLN
inspection. In July, the Java Bali grid operated on an
average reserve margin of 1,382 MW or 7.3 percent of
installed capacity, which was a significant improvement over
April and May though still below world best practices.

Table 3:
Selected Power Statistics (Java-Bali Grid)
--------------------------------------------- -----
Apr May Jun
--------------------------------------------- -----
Capacity (MW) 18,683 18,683 18,683
Peak Load (MW) 14,178 14,279 14,405
Average Reserve (MW) 590 825 1,483
Average Reserve margin (percent) 3.2 4.4 7.9

PASCOE

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