Indonesia: Japanese giants fully support Batang power plant

Indonesia: Japanese giants fully support Batang power plant

Japan's major conglomerate Itochu Corporation and one of world's major
electricity company, Electric Power Development Co. Ltd (J. Power), have
promised to fully support the construction of the coal-fired Batang power
plant in Central Java, which will become not only the most efficient but
also cleanest thermal power plant in Southeast Asia.

The commitment was made during a meeting between the executives of the two
big companies with President Director of publicly listed coal miner PT Adaro
Energy Tbk, Garibaldi Thohir, in Tokyo last week.

The Batang power plant, which will have two generators each with a capacity
of 1,000 megawatt (MW), is currently being constructed by PT Bhimasena Power
Indonesia (BPI), a joint venture between Adaro and J. Power, each with share
ownership of 34 percent, and Itochu with a 32 percent stake.

Eiichi Yonekura, one of a member of the board of senior managing executive
officers of Itochu, said in Tokyo on Thursday, last week, that the
participation in Southeast Asia's largest coal-fired power was part of the
Japanese conglomerate's expansion in Indonesia's power generation business.

He said that Itochu would made anything possible to ensure the US$4.2
billion thermal power project, which had been delayed for nearly four years,
would go according to schedules. The Batang power plant will be Itochu's
second power project in Indonesia.

At present, in a partnership, Medco, Japanese electricity firm Kyushu and US
geothermal company Ormat, Itochu is also developing three geothermal power
plants, with a combined capacity of 320 MW in Sarulla, North Sumatra. The
first unit is expected to begin commercial operation in December 2016.

Itochu, one of the most active Japanese business groups in Indonesia, opened
its first Indonesian office in Jakarta in 1951. At present, it has over a
dozen of business units in the country involved in wide business activities
ranging from textile industry, machineries to property. The company is also
one of Adaro's major coal distributors in the world.

Yunekura said Itochu would further expand its business in Indonesia to tap
into the growing business opportunity in the Southeast Asian country. There
will be no investment limitation for Itochu's business expansion in
Indonesia, now among the most promising market in the world, he said. He,
however, said that legal uncertainties remained a big problem for the
company's business expansion agenda.

Meanwhile, Yoshiki Onoi, a member of J. Power's board of executive managing
officers and head of international power business division, said the company
was accelerating the engineering works of the Batang power plant to ensure
that it could begin its commercial operation on schedule.

He said that more engineers would be dispatched to Indonesia to ensure that
the construction of the power plant would be on-time.

He said that the Batang coal-fired power plant would be the showcase of the
company's latest power generation technology called the ultra-supercritical
(USC) technology, which is not only able to improve efficiency but also
significantly reduce emission, including carbon dioxide and mercury.

With the USC technology, the power plants operate their boilers at
temperatures and pressure above the critical point of water, which results
an efficiency of above 45 percent.

Onoi said that J. Power had also introduced an advanced anti-pollution
technology including the ReACT (Regenerative Activated Coke Technology)
dry-type flue gas desulfurization - denitrification system, which can
significantly reduce emission of sulfur oxides (Sox) and nitrogen oxides.

Both the USC technology and ReACT technology are currently adopted in J.
Power's Isogo coal-fired thermal power plants located about six kilometers
from Yokohama, making it as the world leader in environmental performance.

The use of the clean power technology is part of the Japanese government's
program to reduce the operation of the nuclear power plants following the
deadly earthquake and tsunami which hit Fukushima area in March, 2011. Most
of the nuclear power plants in the country have been shut down following the
natural disaster, which had caused a nuclear accident.

With the use of the new technology, the CO2 emission from the coal-fired
power plants can be reduced as low as those from gas-fired power generators.

Adaro's president Garibaldi Thohir, who is more popularly called Boy, said
that the use of the USC technology would be the right option to meet the
future electricity need of Indonesia, one of the world's largest coal
producers. He said with the technology, although it will be more costly,
Indonesia can fully benefit from its coal resource, while at the same time,
it can eliminate their environmental impact.

For Adaro, the Batang power plant is an important part of its expansion into
power generation business. Through its subsidiary Adaro Power, Adaro is also
building two mine-mouth power plants in South Kalimantan and East
Kalimantan.

As a coal producer, the business expansion into coal-fired power plants
would the company's core business in the future.

Adaro Power plans to build more power plants in the future and to make it as
a major private power producer in the country. When its power business has
generated profits, Power Adaro will be listed in the local stock market, he
said about his coal business vision.

Adaro will be the main coal supplier of PLTU Batang, which needs about 8
million tons of the energy source a year. PT Kaltim Prima Coal (KPC), a
subsidiary of Indonesia's largest coal producer PT BUMI Resources will also
provide the coal supply for the power plant.

In the Batang power project, BPI builds the ultra-supercritical coal fired
power plant under a 25-year build, operate and transfer (BOT) contract. BPI
will sell the electricity to state owned electricity company PLN. The first
unit is expected to begin commercial operation in June, 2020 and the other
one in December, 2020.

The financial closure for the power plant was signed in June, 2016 after
being delayed for about four years due land acquisition problem.

The Japan Bank for International Cooperation (JBIC) agreed to provide about
$2 billion loan of the total loan of $3.4 billion for BPI. The remainders
will come from other Japanese financial institutions, including Sumitomo
Mitsui Banking Corp. and Bank of Tokyo-Mitsubishi UFJA, as well as two
Singaporean entities DBS Bank Ltd. and Overseas Chinese Banking Corp.

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Link to Original Article:
http://www.thejakartapost.com/news/2016/11/15/japanese-giants-fully-support-
batang-power-plant.html

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com