Challenges Faced by the 35 Gigawatt Power Plant Mega Project

The 35 Gigawatt (“GW”) Power Plant Mega Project Program (“the Program”) was launched by the Indonesian government in May 2015. The Program is targeted for completion in 2019. Under the Program, 109 power plants will be developed within the five-year plan with the capacity of 35,000 Megawatt (“MW”), 35 power plant projects with a capacity of 10,681 MW will be developed by the state-owned electricity company, PT Perusahaan Listrik Negara (PLN), and 74 power plant projects with a capacity of 25,904 MW will be developed by independent power producers.

However, the Program faces many obstacles that are encountered along the way and that leads to the postponement of the Program up until 2024 instead of 2019. The main reason of the postponement was to control the imported materials and equipments for power plant construction such as turbines, generators, boilers and others. The postponement is specifically for the power plant project that has not reached the financial close and construction commencement stage. This aims to not disrupt the independent electricity producers and PLN.

Shifting the targeted schedule of the Program will consequently reduce the procurement of imported goods. Reduction of import costs from the Program is estimated to reach US$8 – US$10 billion. Meanwhile, the total investment from the postponement of the 15.2 GW power plant project reaches US$24-US$25 billion.

The Program has the potential to increase imports, thus the government has an intention to increase the usage of local content (“tingkat kandungan dalam negeri/TKDN”) from that of the current regulation. TKDN for power plant project as set out in the Regulation of the Minister of Industry Number 54/M-IND/PER/3/2012 of 2012 on Guidelines for Domestic Products Use For Development of Electricity Infrastructure and its amendment regulates the minimum usage of local content e.g. coal-fired power plant/PLTU with installed capacity of 100 MW up to 600 MW shall contain 40% (forty percent) of local content both goods and services source. As for geothermal power plant/PLTP with installed capacity of more than 110 MW shall have 28,95% (twenty-eight point eighty five percent) of local content both goods and services source and for the steam power plant/PLTGU with installed capacity of 100 MW up to 300 MW shall have 34,76% (thirty four point seventy six percent) of local content both goods and services source. (ppm)

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Dendi Adisuryo
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Liza Mashita
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This publication has been prepared by Aditya Yudhistira for general informational purposes only to provide clients with information on recent legal developments and is not intended as legal advice or opinion.