Power Problems

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  • TEMPO.CO, Jakarta - As head honcho of state-owned Perusahaan Listrik Negara (PLN), Sofyan Basir is understandably in a hurry to reach his goal of adding another 35,000 MW to the national power grid. Appointed to his job one year ago, he knows it isn't going to be easy to improve PLN's troubled finances and ensure that the nation no longer suffers from power blackouts. Whatever steps he takes, Sofyan should remember one important thing: It is better to be safe than sorry.

    That's because a number of the former Bank BRI CEO's policies seem to be generating considerable suspicion. This is particularly the case with the Rp1 trillion, 35,000MW power program spread around 201 locations across Indonesia.

    Launched by President Joko Widodo at Gadingsari village in Yogyakarta last May, the five-year program was designed on the basis of a six-percent national economic growth rate and the attendant need for an additional 7,000 MW a year. One can imagine the chaos that would be created if the target date was not met.

    Companies from various countries have tendered for the projects, one of them being China. It is from here the bad odor seems to be emanating. Sofyan is believed to have favored Chinese power contractors over a number of other tenders. 

    It will not be the first time China is involved in building power stations in Indonesia. Chinese firms were responsible for much of the controversial 10,000MW crash power program, initiated by the Susilo Bambang Yudhoyono government.

    For example, together with a consortium of national companies, the China Nuclear Engineering Group Corporation recently won the contract to build the 2,000 MW coal-fired 'Java 5' plant project in Banten province. 

    Suspicions abound that it did so after Japanese giants Mitsubishi, Marubeni and Sumitomo were locked out of the bidding process, as they were for the 10,000 MW program. The suspicion stems from the short time they were given to prepare the tender documents, with the successful bidder given a month's deadline to submit a performance bond amounting to 10 percent of the project's total value.

    Japanese and national companies found this requirement difficult to meet because they need at least four months to get the necessary bank loans. It's not a small amount by any means. With the project valued at US$3.4 billion, the guarantee to be deposited at a state-owned bank was a cool $340 million.

    This chokehold of a criterion appears to have been made so PLN could be assured that Chinese companies had the advantage over other bidders.

    It was this irregularity that was the subject of a query from the PLN board led by new chairman Kuntoro Mangkusubroto, a former mines and energy minister and the former head of president Yudhoyono's government monitoring unit.

    Last December, the board sent a letter to PLN executives asking them to reconsider the rules because they were patently unfair to non-Chinese companies. Kuntoro questioned the basic policy, at the same time reminding the executives that Indonesia should not be dependent on one country for its electricity technology. 

    The board also recommended that PLN would do better not to repeat the mistakes made with the 10,000MW program in which many of the plants were built with low-tech boilers and other outdated boilers equipment, which could not perform at their stated capacity.

    The board was not the only one questioning PLN. The energy and minerals ministry also made an issue out of PLN's refusal to buy electricity from the Muara Leboh geothermal power plant in West Sumatra, with the excuse that it was too expensive. If that was the case, then instead of delaying a decision, the company should have sight to renegotiate the contract. 

    Sofyan Basir should have reconsidered some of the underlying issues before deciding on policies that have caused such controversy. It is not just about finding a good price, but also about ensuring that we end up with quality products. Allowing one nation to take the dominant position in power development is dangerous because it compels us to rely on that one country for the supply of spare parts.

    Sofyan must reevaluate his decisions. There is no harm in discussing them with other relevant stakeholders, such as the energy ministry, to discuss power station tenders. Without the right planning and fair procedures, it will not be just PLN and its chief executive who will lose out, but also the Indonesian people who dream of a future free of power blackouts. (*)

    Read the complete story in this week's edition of Tempo English Magazine