Govt ac­cused of de­ceit over hy­dropower projects

The Jakarta Post - - FRONT PAGE - Viriya P. Sing­gih

Hy­dropower de­vel­op­ers have ac­cused the gov­ern­ment of mis­lead­ing busi­nesses when it backpedaled from a fa­vor­able pol­icy to de­velop re­new­able en­ergy, adding to a new list of reg­u­la­tory un­cer­tain­ties plagu­ing the en­ergy sec­tor.

The prob­lem cen­tered around a de­ci­sion by sev­eral in­de­pen­dent power pro­duc­ers (IPPs) to agree to the gov­ern­ment’s de­mand to sign power purchase agree­ments (PPAs) with state power com­pany PLN de­spite some de­tails not hav­ing been agreed on.

The gov­ern­ment has promised that if the IPPs agree to im­me­di­ately sign the PPAs all con­tentious is­sues will be re­solved through fu­ture ne­go­ti­a­tions.

How­ever, in­stead of get­ting fa­vor­able poli­cies the IPPs have to carry a burden that will ren­der the projects fi­nan­cially un­fea­si­ble, the As­so­ci­a­tion of Hy­dro­elec­tric Power Plant De­vel­op­ers (APLTA) said on Wed­nes­day.

APLTA chair­man Riza Husni told The Jakarta Post that when ne­go­ti­at­ing the de­tails of the agree­ments, the IPPs found out that the min­istry, through PLN, tried to in­clude a num­ber of ques­tion­able clauses in the PPAs.

For in­stance, Riza said, the IPPs were obliged to de­velop their power plants us­ing the build, own, oper­ate, trans­fer (BOOT) scheme within a pe­riod of 25 years, then sell the prop­erty to PLN at the end of the agree­ment for US$1,000 and that all taxes ap­plied dur­ing the projects’ trans­fer would be borne by the IPPs.

Riza said the IPPs had no other op­tion but to sign the PPAs be­cause they had since 2015 spent time and money on the study and had even pur­chased plots to de­velop the plants.

“Ideally, IPPs should ne­go­ti­ate the PPA first with PLN, sign it and later make a de­posit in a bank as a con­struc­tion guar­an­tee. But what re­ally hap­pened over the past sev­eral months was that the IPPs were forced to sign the agree­ments and now they are still ne­go­ti­at­ing the de­tails with PLN,” Riza.

From Au­gust to Novem­ber, the En­ergy and Min­eral Re­sources Min­istry wit­nessed the sign­ing of 66 PPAs be­tween PLN and var­i­ous IPPs for re­new­able plants to gen­er­ate 1,189.2 megawatts (MW) of elec­tric­ity, 84 per­cent of which were hy­dropower plants.

Both the min­istry and PLN had touted the achieve­ment, say­ing that In­done­sia had never been able to seal as many deals and that the coun­try was on the right track to meet its Paris Cli­mate Agree­ment to re­duce green­house gas out­put by 29 per­cent by 2030.

But with the agree­ments un­rav­el­ing it is likely that the projects’ con­struc­tion will be shelved by in­vestors.

An­other is­sue ham­per­ing the IPPs is a clause ex­empt­ing PLN from an obli­ga­tion to purchase elec­tric­ity from the hy­dropower plants.

The IPPs are re­quired to agree on rene­go­ti­at­ing the PPAs if PLN decides to do so. The de­vel­op­ers were also told to take PLN to court if they re­fused to com­ply with PLN’s de­mand.

Riza said af­ter forc­ing the IPPs to set a low price for hy­dropower, PLN only wanted to pay for the re­new­able elec­tric­ity in ru­piah, forc­ing the de­vel­op­ers to take the for­eign ex­change risk. “Hence, look­ing at such one-sided PPAs, do­mes­tic banks are re­luc­tant to pro­vide soft loans.”

The In­done­sian Cham­ber of Com­merce and In­dus­try’s (Kadin) deputy chair­man for re­new­able en­ergy, Halim Kalla, said many hy­dropower de­vel­op­ers could not pro­ceed with their projects due to fi­nan­cial con­cerns.

“How could they pro­ceed if they have to fol­low such dif­fi­cult re­quire­ments, in­clud­ing the one oblig­ing them to trans­fer the plants to PLN at the end of the agree­ment?” Halim said.

The En­ergy and Min­eral Re­sources Min­istry could not be reached for com­ment.

How­ever, PLN re­new­able en­ergy di­vi­sion head To­hari Ha­diat said the IPPs should have cal­cu­lated all of the risks when sign­ing the PPAs. “When we’re talk­ing about the eco­nom­i­cal as­pect of a project, it de­pends on two things: price and costs. As the price has been set, the IPPs should find a way to min­i­mize the costs of their projects oth­er­wise banks won’t be in­ter­ested in pro­vid­ing loans.”

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