China-invested power plant starts construction in Indonesia to resolve electricity shortage

BENGKULU, Indonesia - The construction inauguration of Western Indonesia Bengkulu province's first coal-fired power plant invested by China kicked off here on Tuesday.

The power plant aims to help battle endemic electricity shortages and revive local economic growth.

Tenaga Listrik Bengkulu (TLB), a joint venture between the local listed conglomerate PT Intraco Penta and the state-owned giant Power Construction Corporation of China (PowerChina), has an installed capacity of 2x100 megawatts and is expected to be fully commercially operated in 2019.

The $360 million plant under a contract of 25-year Build-Own-Operate-Transfer (BOOT) model is part of Indonesian President Joko Widodo's ambitious plan to add 35,000 megawatts of power capacity within five years.

Bengkulu Governor Ridwan Mukti said at the ceremony that Bengkulu is a province with rich coal, fishery and agricultural resources, but due to the limitation of power supply, the province is short of investment and lagging behind with relatively high poverty rate.

"TLB will create more jobs, increase government revenue, spur local economic activities as well as bring other positive impact to the province," he said.

Indonesian power utility Perusahaan Listrik Negara (PLN) said in a press statement that the project which is located in the western area of Sumatra Island could supply around 1.4 Gigawatt Hour (GWh) of electricity to Sumatra power grid and save up to 1.7 trillion rupiah (about $130 million) every year once completed.

Sheng Yuming, chairman of PowerChina Resource, the oversea investment arm of PowerChina, said PowerChina has equipment and the capability to design, build and operate the plant independently and is capable to ensure the quality.

Noting the bright prospect of Indonesia's power market, Sheng said his company will expand the engagement in the country by enhancing investment, more technology transfer, strengthening the responsibility of environment protection and corporate social responsibility (CSR).

TLB which PowerChina holds 70 percent of stake is an independent power producer (IPP). The company won the project in an international competitive bidding in the second quarter of 2015 and secured the power purchase agreement (PPA) with PLN in November 2015.

Seventy five percent of the project financing comes from the loan of the Industrial and Commercial Bank of China (ICBC) and Export-Import Bank of China while the rest is from the cash flow of the stakeholders.