VZCZCXRO4561
RR RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHJA #2241/01 3470855
ZNR UUUUU ZZH
R 120855Z DEC 08
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 0946
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHKO/AMEMBASSY TOKYO 2838
RUEHBY/AMEMBASSY CANBERRA 3395
RUEHBJ/AMEMBASSY BEIJING 5723
RUEHJS/AMCONSUL SURABAYA 2334
RHMFISS/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 02 JAKARTA 002241 
 
DEPT FOR EAP/MTS AND EB/ESC/IEC/ENR 
DOE FOR PI-32 CUTLER AND GILLESPIE 
COMMERCE FOR 4430/NADJMI AND 6930/HUEPER 
DEPT PASS USTR EHLERS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EPET ENRG EINV PREL ID
SUBJECT: INDONESIA ELECTRICITY AND GEOTHERMAL HIGHLIGHTS - NOVEMBER 
2008 
 
JAKARTA 00002241  001.2 OF 002 
 
 
¶1. Summary.  Growth of the Indonesian electricity sector has been 
insufficient to keep up with GDP growth and requires significant 
additional investment.  The government plans for independent power 
producers to contribute to future growth, but Indonesia must provide 
additional financial guarantees to attract sufficient business 
interest.  The 10,000 MW Fast Track program is proceeding, but 
Indonesian financing has been difficult.  There have been four new 
geothermal tenders this year, the first group under Indonesia's new 
Geothermal Law.  End Summary. 
 
---------------------------------- 
Electricity Sector Growth and IPPs 
---------------------------------- 
 
¶2. According to the Director of Program Supervision at Directorate 
General of Electricity Emmy Perdanahari, during 2005-2008 GDP growth 
was about 6.2% annually, electricity demand increased 7% per year, 
but electricity generating capacity increased only 3.5% per year. 
According to PLN data, as of 2007 PLN's installed capacity was 
29,705 MW, in which 22,302 MW was in the Java-Bali grid.  PLN 
predicts that by 2018, there will be up to 31 million additional 
customers.  To meet the new demand, the Indonesian electricity 
sector will need about $68.3 billion in new investment during that 
time -- $31.4 billion for generation, $24.5 billion for 
transmission, and $12.4 billion for distribution.  PLN estimates it 
needs 57,000 MW of additional capacity over 10 years, and they 
expect independent power producers (IPP) to add about 22,000 MW, 
with the remainder to come from PLN-owned plants. 
 
¶3. Indonesia currently has 16 IPPs with 4,194 MW of generating 
capacity, 10 in Java-Bali and 6 in other regions.  As of October 
2008, additional IPP projects were in the following stages, although 
many of the projects may not go forward as planned: 
 
- Construction: 11 Projects, 880 MW (Java-Bali 2; Other 9); 
- Financing: 37 Projects, 3,187 MW (Java-Bali 6; Other 31); 
- PPA Finalization: 14 projects, 3,040 MW (Java-Bali 4, Other 10); 
and 
- Evaluation and Bidding: 53 projects, 14,515 MW (Java-Bali 17, 
Other 36). 
 
¶4. Indonesia has had trouble attracting sufficient IPP interest to 
meet its electricity generation goals, and industry observers have 
indicated that in many cases PLN's Power Purchase Agreements (PPA) 
were not sufficient guarantees for IPP financing, as they do not 
carry the explicit backing of the Indonesian government.  On 
November 27, Minister of Energy and Mineral Resources (MEMR) Purnomo 
Yusgiantoro sought to address this problem by stating that the 
government will provide a financial guarantee, which would amount to 
2.5%-5% of the total value of a project, to be used by IPPs in 
applying for bank loans.  The ministry has pooled funds amounting to 
$600 million for the so-called Indonesia Infrastructure Fund (IIF), 
which would benefit the development of power projects. 
 
-------------------- 
10,000 MW Fast Track 
-------------------- 
 
¶5. PLN's primary electricity generation expansion program remains 
the 10,000 MW Fast Track program.  Fast Track Phase I has a total 
capacity of 9,549 MW planned for development in 35 projects in 
Java-Bali (7,430 MW), Sumatera (1,245 MW), Kalimantan (415 MW), 
Sulawesi (239 MW), and other islands (240 MW).  Chinese companies 
are the primary construction contractors on all but a few of the 35 
projects, which will be owned and operated by PLN.  To date, 8 out 
of 10 projects inside Java-Bali and 6 out of 25 projects outside 
Java-Bali have started with more than 10% progress.  The government 
projects the completion date of ongoing projects will be around 
midyear 2010, with finance support from some foreign banks 
coordinated by PLN and the Finance Ministry.  Some industry 
observers dispute the target date, noting that completion rates 
offered by PLN reflect civil engineering only.  No plants have yet 
received boilers or other operational equipment. 
 
¶6. Although much of the financing for the 10,000 MW Fast Track Phase 
I program is done through concessionary loans from the Chinese 
government, Indonesia must come up with a portion.  Press reports 
indicated that Indonesia would seek two sources of financing:  an 
international bond sale for about $1 billion, and a domestic 
portion, originally expected to be about Rp 3 trillion ($273 
 
JAKARTA 00002241  002.2 OF 002 
 
 
million).  The government has not yet sought international 
financing, but the domestic issuance has recently been scaled back 
to Rp 1.5 trillion, Rp 500 billion of which they hope to raise 
through sharia banking sources. 
 
¶7. Four coal suppliers for the new plants have been identified 
through public tender:  PT Baramutiara Prima, PT Titan Mining 
Energy, a consortium of PT Senamas Energindo Mulia and PT Kasih 
Industri Indonesia, and PT Arutmin Indonesia with PT Darma Henwa. 
Those four companies shall supply ten power plants in Java-Bali with 
18,691 million ton of coal per year, to produce 6,900 MW of 
electricity.  The first coal delivery is scheduled for the second 
quarter of 2009. 
 
------------------------ 
Geothermal Progress 2008 
------------------------ 
 
¶8. Indonesia has 40% of the world's geothermal resources, with total 
potential resources of 27,510 MW.  As of 2008 installed capacity was 
only 1,042 MW, of which 1,000 MW is located in Java, 40 MW in 
Sulawesi, and 2 MW in Sumatera. On October 21, President of the 
Indonesian Geothermal Association Surya Darma said that the 
Indonesian government has an ambitious target to install up to 9,500 
MW of geothermal generating capacity by 2025.  Four geothermal 
tenders have been awarded in 2008, the first projects under the 2003 
Geothermal Law, as follows: 
 
- Cisolok (W Java), 45 MW - Indonesia Power, August 2008; 
- Tangkuban Prahu (W Java), 220MW - Indonesia Power (in partnership 
with U.S. company Raser Technologies, Inc.), August 2008; 
- Tampomas (W Java), 50MW - Wijaya Karya, August 2008; and 
- Jailolo (N Maluku), 75 MW - Star Energy, December 2008. 
 
HUME