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13 August 2008 - Amid high prices of raw materials for construction, Indonesia's industry ministry has thrown its weight behind contractors for PT PLN's 10 GW power plant programme, asking the state electricity firm to re-evaluate the value of the projects.
The ministry and construction companies have been holding meetings with PLN to strike a settlement, Chanty Triharso, machine industry director of the Industry Ministry, told the Jakarta Post.
Chanty said the meetings were to discuss the proposal by "the ministry and engineering, procurement and construction (EPC) contractors to increase by an average 30 per cent the value of the projects". Chanty pointed to steel prices that have increased by 45 per cent in the first semester, saying they would push up the construction costs of 25 coal-fired plants to be built outside Java.
The escalation in expenses is allowable under EPC contracts as the projects were carried out over more than two fiscal years, Chanty argued.
Chanty said raw material prices and fuel price increases affected only 25 power plants under construction outside Java as many of the projects' spending was carried out before the events.
Meanwhile, nine power plants in Java, also under the 10 GW programme, are safe from the impact of price increases because their construction started before prices started rising, Chanty said.
Of the 25 EPC contracts for the power plants outside Java, 22 have been officially signed as of Aug. 4, while the remaining three are being re-offered in public biddings, according to PLN.
Chanty hoped the proposal would be approved immediately, as "We expect most of the EPC contractors to have all started the work to build power plants (outside Java) next year."
The original target was to complete most of the plants by the end of 2010.
The government, through PLN, launched the "10 GW crash programme" last September to help overcome the nation's power crisis, including putting an end to the blackouts regularly occurring in many parts of the country. A total of 34 coal fired power plants will be built under the programme.
The launch was marked with the start of the construction of the first power plant in Pelabuhan Ratu, West Java.
The plant, being built by a consortium consisting of China's Shanghai Electric and local firm Maxima Infrastruktur, will have three generator units, each with a capacity of 350 MW.
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