KEPCO and Doojung's Investment in Indonesian Coal Power Plants: "Project on Hold" vs. "Final Decision After Reevaluation of Preliminary Feasibility Study"

US Think Tank IEEFA: "Indonesian State-Owned Company's Financial Crisis Beyond Government's Capacity... Project Suspension Also an Option"
KEPCO: "Final Decision on Participation in Java 9&10 Project Pending Reassessment and Internal Review"

[Asia Economy Reporter Moon Chaeseok] Due to the COVID-19 pandemic, the Indonesian government is considering renegotiating power purchase agreements for domestic private coal-fired power projects, leading to calls for Korea Electric Power Corporation (KEPCO) and Doosan Heavy Industries & Construction to withdraw their investments in coal power projects. KEPCO stated that it will decide on its participation after reviewing the results of the preliminary feasibility reassessment.

According to Climate Solutions on the 14th, the U.S. think tank Institute for Energy Economics and Financial Analysis (IEEFA) wrote in a report titled "PLN Crisis: Time for Private Power Producers to Share the Pain" on the 8th that investments in Indonesian coal-fired power plants should be halted.

As the Indonesian government faces financial burdens due to COVID-19, it is expected to increase subsidies to the state-owned enterprise PLN by about $7.2 billion (approximately 8.7 trillion KRW). Ultimately, it is argued that the government will seek to share the burden with private power producers from Korea, Japan, and other countries.

The report diagnosed that due to the increased financial burden on PLN caused by the COVID-19 aftermath, the progress of the Java 9&10 project, promoted by KEPCO, is uncertain. PLN has so far signed power purchase agreements (PPAs) with private power producers from Korea, Japan, and others, under which it pays for electricity regardless of actual usage.

With an additional 7,365 MW of capacity expected to be installed within the Java-Bali grid by the end of next year, the report cited Rida Mulyana, former Director of Electricity, who last month forecasted that the Java-Bali system would expand its reserve margin to 41.5%.

The report warned that due to the Indonesian government's downward revision of economic growth forecasts and errors in the overly optimistic power supply and demand plans, the burden on foreign private operators will also increase. Last year, Indonesia's power supply and demand plan's demand forecast was on average 34.2% lower than in 2015.

Given the structure where PLN is obligated to pay for electricity regardless of purchase, it is expected that next year the cost of power purchases from private power plants will constitute the largest portion of PLN's operating expenses.

The report stated, "Reflecting the revised economic growth rate, the Indonesian government will have to provide PLN with $7.2 billion (approximately 8.7 trillion KRW) in subsidies by next year," adding, "The Indonesian government cannot bear PLN's financial burden alone and will need to share the pain with private power producers."

It further suggested, "From the perspective of private power producers, it is necessary to consider suspending projects in the Java-Bali grid, such as the delayed Java 9 and 10 units."

A KEPCO official said, "'The Java 9&10 project' is currently undergoing a preliminary feasibility reassessment," adding, "We plan to make a final decision on KEPCO's participation based on the results of the reassessment and internal reviews."

This content was produced with the assistance of AI translation services.