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Study on Economic Partnership Project

in Developing Countries in FY2014

Study on Coal-Fired Power Plant in Anyer,


The Republic of Indonesia

Final Report

February 2015

Prepared for:
Ministry of Economy, Trade and Industry
Ernst & Young ShinNihon LLC
Japan External Trade Organization
Prepared by:
E&T Research Institute, Inc.

Reproduction Prohibited

Preface
This report contains a summary of research outcomes gained from a FY2014 Research Project to Help
Promote Installation of Infrastructure/Systems of Energy Supply-Demand Mitigation Type (Fact-finding Study on
the Formation of A Yen-loan/Private-fund-based Project, Etc.) awarded by the Ministry of Economy, Trade and
Industry as one of its FY2014 projects to E&T Research Institute, Inc. (contractor) and ASAHI Glass Co., Ltd.
(co-proposer).
This research, entitled Indonesia: A Feasibility Study on Construction of the ANYER Coal-fired Power
Station, is designed to examine the feasibility of a project planned for ASC Co., Ltd, a chlor-alkali maker of the
largest class in Southeast Asia and a consolidated subsidiary of ASAHI Glass. The project, in which a coal-fired
power generation capacity will be introduced into the site of ANYER plant owned by ASC, is expected to allow
ASC to secure captive power resources while making a great contribution to easing the local electricity
supply-demand balance problems in the plants adjoining areas.

We sincerely hope this report would be found informative for all the parties concerned in this country and be
helpful in realizing the planned project.

February 2015
E&T Research Institute, Inc.(contractor)
ASAHI GLASS CO., LTD.(co-proposer)

Project Map

Source : Google earth

Abbreviation List

Abbreviations
AMDAL

Official name
Analisis Mengenai Dampak Lingkungan

Japanese translation

(Environmental Impact Assessment)


ANDAL

Analisis Dampak Lingkungan Hidup

EIA

(Environmental Impact Analysis)


BAKOREN

Badan Koordinasi Energi Nasional

(National Energy Adjustment Committee)


BAPEDAL

BAPPEDA

Badan Pengendalian Dampak Lingkungan

2000

(Emvironmental Impact Management Agency)

BPLHD

Badan Perencana Pembangunan Daerah

(Regional for Planning and Development Agency)


BPLHD

BPPT

Badan Pengelolaan Lingkungan Daerah (Regional

Environmental Agency/Department of Environment)

Badan Pengkajian dan Penerapan Teknologi

(Agency for the Assessment and Application


of Technology)
BKPM

Badan Koordinasi Penanaman Modal

CCT

Clean Coal Technology

CFB

Circulating Fluidized Bed

CFPP

Coal-Fired Power Plant

COP

Conference of the Parties

CMP

Conference of the parties serving as the Meeting of

the Parties to the Kyoto Protocol


CoW

Contract of Work

CCoW

Coal Contract of Work

DEN

Dewan Energi Nasional

(National Energy Council)


DGE

Directorate General of Electricity

DMO

Domestic Market Obligation

EIA

Environmental Impact Assessment

ESDM

Kementerian Energi dan Sumber Daya Mineral

(Ministry of Energy and Mineral Resources)


FS

Feasibility Study

HBA

Harga Batubara Acuan (Coal Price Refence)

HPB

Harga Patokan Batubara (Benchmark Coal Price)

ICI

Indonesia Coal Index

Abbreviations

Official name

Japanese translation

ICMA

Indonesia Coal Mining Asociation

ICPR

Indonesia Coal Price Reference

IEA

International Energy Agency

IPP

Independent Power Producer

IUP

Izin Usaha Pertambangan

(Mining Business License)


IUPK

IUP Khusus

(Special Mining Business License)


IUPTL

Izin Usaha Penyediaan Tenaga Listrik

(Power Supply License)


IO

Izin Operaloperating license

JICA

Japan International Cooperation Agency

MEMR

Ministry of Energy and Mineral Resources

MOE

Ministry of the Environment

PLN

PT Perusahaan Listrik Negara

(State Electricity Company)


PPA

Power Purchase Agreement

PPU

Private Power Utilities

RTRW

Rencana Tata Ruang Wilayah

(Sapcial Plan)
RUEN

RUKN

Rencana Umum Energi Nasional

(National Energy Plan)

Rencana Umum Ketenagalistrikan Nasional

(General National Power Plan)


RUPTL

Rencana Umum Penyediaan Tenaga Listrik

(Electrical Power Supply Plan)


SC

Super Critical

SPC

Special Purpose Company

Sub-C

Sub Critical

USC

Ultra Super Critical

WU

Wilayah Usaha

business area

Table of Contents

Preface
Project Map
Table of Contents
Abbreviation List

Executive Summary ................................................................................................................................................... 1


(1) Projects Background, Needs and Others ........................................................................................................ 3
1) Public background and necessity of the project ............................................................................................ 3
2) ASCs Business Environment ....................................................................................................................... 3
a) Electricity tariff increases .......................................................................................................................... 3
b) Power balance crisis becoming conspicuous ............................................................................................. 4
3) ASCs business plans .................................................................................................................................... 4
(2) Basic policy applied when determining projects contents .............................................................................. 4
(3) General Descriptions of the Project ................................................................................................................. 6
1) General Descriptions of the Project .............................................................................................................. 6
2) Project Cost ................................................................................................................................................... 7
aConstruction costs (design, procurement, construction works: EPC) ...................................................... 7
bInitial investment cost .............................................................................................................................. 8
c) Running costs ............................................................................................................................................ 9
3) Major Results of Preliminary Financial/Economic Analysis ........................................................................ 9
4) Evaluation of Environmental and Social Impacts ....................................................................................... 10
a) Status-quo Analysis on Socio-Environmental Aspects ............................................................................ 10
b) Improved Enviroment Expected from the Project ................................................................................... 10
c) Projects Impacts on Socio-Environmental Aspects ................................................................................ 10
d) Outline of Host Countrys Laws Related to Socio-environmental Cares and Essential Measures
Required for Observance ..............................................................................................................................11
e) Vital Matters to Be Done by the Concerned Entities in the Host Country for Successful Project............11
(4) Project Schedule ............................................................................................................................................ 11
(5) The feasibility for the implementation ........................................................................................................... 12
(6) Superiority in Japanese companies technical, etc. ......................................................................................... 12
(7) Map of the project site ................................................................................................................................... 13
Chapter1 Overview of the Host Country and Sector ............................................................................................... 15
(1) Overview of the target sector of project......................................................................................................... 17
1) Energy Policy .............................................................................................................................................. 17
a) New National Energy Policy (New KEN) (2014) ................................................................................... 18

b) Major Laws on Energy & Electricity ...................................................................................................... 20


2) Energy Demand and Price Trends .............................................................................................................. 20
a) Generated Output..................................................................................................................................... 20
b) Electricity Sales Amount ......................................................................................................................... 21
c) Electricity Outlook .................................................................................................................................. 22
d) Electricity Supply Plan ............................................................................................................................ 23
e) Electricity Tariffs ..................................................................................................................................... 25
f) Industrial Electricity Tariff Increases/Automatic Tariff Adjustment System ........................................... 25
g) Government Subsidies to PLN ................................................................................................................ 25
h) State of PLN Management ...................................................................................................................... 27
3Structure of Energy-related Industries....................................................................................................... 27
a) Outline of Electric Utility Industry .......................................................................................................... 27
b) The Ministry of Energy and Mineral Resources (MEMR) ...................................................................... 28
c) State-run Electric Utility (PLN)............................................................................................................... 29
d) IPPs (Independent Power Producers) ...................................................................................................... 30
4) Generating Facilities and Network Systems: Status-quo and Plans ............................................................ 31
a) Nations General Electricity Plan (RUKN) and Electricity Supply Service Plan (RUPTL) .................... 31
b) Two Crash Programs ............................................................................................................................... 33
c) Investment Needs .................................................................................................................................... 35
5) Trend about the Coal Resources ................................................................................................................. 36
a) General Descriptions of Coal Resources in Indonesia............................................................................. 36
b) Relevant Moves to Mining Act in Indonesia ........................................................................................... 41
c) Indonesian Coal Production Trends ......................................................................................................... 55
d) Transport Means from Coal-producing to Consuming Areas .................................................................. 56
(3) Situation in the target area ............................................................................................................................. 61
1) Development Risks ..................................................................................................................................... 61
a) Conditions of the Domestic Economy ..................................................................................................... 61
b) Exchange Risks ....................................................................................................................................... 62
c) Natural Disasters...................................................................................................................................... 63
d) Policy Changes ........................................................................................................................................ 63
e) Riots and Other Anti-social Actions ........................................................................................................ 64
2) Environment around the proposed project site............................................................................................ 66
Chapter2 Study Methodology .................................................................................................................................. 68
(1) Contents of FS works ..................................................................................................................................... 70
1FS contents ................................................................................................................................................ 70
2FS target .................................................................................................................................................... 70
(2) Research methodology/system....................................................................................................................... 72
1Research methodology .............................................................................................................................. 72
2Research system ........................................................................................................................................ 72

(3) Research schedule .......................................................................................................................................... 72


Chapter3 Justification, Objective and Technical Feasibility of the Project ............................................................. 74
(1) Projects Background, Needs and Others ...................................................................................................... 76
1) Public background and necessity of the project .......................................................................................... 76
2) ASCs Business Environment ..................................................................................................................... 76
a) Electricity tariff increases ........................................................................................................................ 76
b) Power balance crisis becoming conspicuous ........................................................................................... 77
3) ASCs business plans .................................................................................................................................. 77
(2) Upgrading and Rationalization of Energy Use ................................................................................... 79
(3) Multi-Angle Examinations Necessary for Deciding Projects Contents and Others .................. 80
1) Outline and Particulars of Relevant Regulations/Policies........................................................................... 80
a) Electric Utility Industry System .............................................................................................................. 80
b) Electricity Act .......................................................................................................................................... 80
c) Legal system of the New Electricity Act ................................................................................................. 82
2) Details of relevant regulations/policies ....................................................................................................... 85
a) Outline of the regulations ........................................................................................................................ 85
b) Regulations applicable to IPP .................................................................................................................. 85
c) Regulations applicable to PPU ................................................................................................................ 86
3) Views held by relevant offices .................................................................................................................... 89
a) Summary.................................................................................................................................................. 89
b) The Ministry of Energy and Mineral Resources (MEMR): General Bureau of Electricity ..................... 89
c) PLN: Officer in charge of Power System Planning ................................................................................. 90
d) PLNMarketing Division ...................................................................................................................... 91
e) Cilegon City: Mining Energy Division, Cooperative Bureau for Commerce & Industry ....................... 93
4) Demand Outlook ......................................................................................................................................... 95
a) Indonesias electricity supply-demand outlook ....................................................................................... 95
b) ASCs electricity demand outlook ........................................................................................................... 95
3) Procurement of fuel..................................................................................................................................... 96
a) General Descriptions of Indonesian Mines.............................................................................................. 96
b) Selection of Mines as Potential Suppliers ............................................................................................... 98
(4) General Descriptions of the Project Plan ..................................................................................................... 105
1) Basic policy applied when determining projects contents ....................................................................... 105
2) Contents of the proposed project .............................................................................................................. 110
a) Appraisal bases/preconditions ................................................................................................................110
b) Business model .......................................................................................................................................112
c) Technology .............................................................................................................................................113
3) Conceptual design and specifications of candidate equipment ................................................................. 117
a) Site and major equipment .......................................................................................................................117
b) Generated output and type of the power plant....................................................................................... 120

c) Steam conditions and others .................................................................................................................. 120


d) Coal calorific value ............................................................................................................................... 121
e) Annual coal requirements ...................................................................................................................... 121
f) Coal stocks ............................................................................................................................................. 121
g) Ash dumping yard ................................................................................................................................. 121
h) Water intake/discharge .......................................................................................................................... 121
i) Specifications (a summary) .................................................................................................................... 122
4) Subjects accompanied when employing the proposed technologies/systems and their solutions ............. 123
Chapter4 Evaluation of Environmental and Social Impacts .................................................................................. 124
(1) Status-quo Analysis on Socio-Environmental Aspects ................................................................................ 126
1) Analysis of status-quo ............................................................................................................................... 126
a) Status-quo of environmental problems .................................................................................................. 126
b) Land use/development (environment around the proposed project site) ............................................... 127
2) Outlook (Without the project implemented) ............................................................................................. 129
(2) Improved Enviroment Expected from the Project ....................................................................................... 131
1) Comparison of CO2 emissions per unit .................................................................................................... 131
a) Indonesian Grid ..................................................................................................................................... 131
b) the target project (Case 1, Case 2) ......................................................................................................... 131
2) annual CO2 emission reduction ................................................................................................................ 131
(3) Projects Impacts on Socio-Environmental Aspects .................................................................................... 133
1) Items checked for socio-environmental reasons ....................................................................................... 133
a) Permits/explanations .............................................................................................................................. 133
b) Pollution control measures .................................................................................................................... 134
c) Natural environment .............................................................................................................................. 136
d) Social environment ................................................................................................................................ 137
e) Others .................................................................................................................................................... 139
2) Examinations of the project compared with other options ........................................................................ 140
3) Outcome of information gathering on socio-environmental impacts ........................................................ 140
(4) Outline of Host Countrys Laws Related to Socio-environmental Cares and Essential Measures Required for
Observance ........................................................................................................................................................ 141
1) Outline of socio-environmental cares-related laws involved in project implementation .......................... 141
a) Environmental management and environmental impact assessment ..................................................... 141
b) Space planning ...................................................................................................................................... 142
c) Major laws on environmental measures/stndards .................................................................................. 142
d) Emission standards applicable to fossil fuels-fired power plants .......................................................... 144
2) EIAs Contents and others required by the host country before project implementation ......................... 146
a) Applications/approvals .......................................................................................................................... 146
b) Organization of AMDAL documents .................................................................................................... 147
(5) Vital Matters to Be Done by the Concerned Entities in the Host Country for Successful Project .............. 148

Chapter5 Financial and Economic Evaluation ....................................................................................................... 150


(1) Integration of project costs........................................................................................................................... 152
1Construction costs (design, procurement, construction works: EPC) ..................................................... 152
2Initial investment cost ............................................................................................................................. 153
3) Running costs ............................................................................................................................................ 154
(2) Major Results of Preliminary Financial/Economic Analysis ....................................................................... 156
1Financial internal rate of returns (FIRR) ............................................................................................. 156
2Economic internal rate of returns (EIRR) ............................................................................................... 160
3General appraisal ..................................................................................................................................... 160
Chapter6 Planned Project Schedule ....................................................................................................................... 162
Chapter7 Implementing Organizations .................................................................................................................. 166
(1) Competent Organizations of the Host Country ............................................................................................ 168
(2)Participating Entities in the Project............................................................................................................... 168
1) Project development stage ........................................................................................................................ 168
2) Project implementation stage .................................................................................................................... 169
Chapter8 Technical Advantage of Japanese Companies ....................................................................................... 170
(1) Participation form of Japanese companies that are assumed (investment, equipment supply, facilities
operation and management, etc.) ....................................................................................................................... 172
1) Investment ................................................................................................................................................. 172
2) Equipment supply ..................................................................................................................................... 172
3) Operation and management of the facility ................................................................................................ 173
(2) Superiority of Japanese companies during the project implementation (technical, economic) ................... 174
1) Technical Superiority ................................................................................................................................ 174
2) Economic superiority ................................................................................................................................ 174
a) The loan limit for coal-fired power plant............................................................................................... 174
b) Efforts of Japanese government and governmental agencies ................................................................ 176
(3) Measures necessary in order to facilitate the orders of Japanese companies ............................................... 177

Executive Summary

(1) Projects Background, Needs and Others


1) Public background and necessity of the project
In Indonesia, while the power demand increases steadily with economic growth, it has fallen into serious power
shortage due to a delay of the development of power supply and the power transmission & distribution network.
According to the power supply business plan of PLN (RUPTL, 2013 Edition), through 2013-2022, power demand
in Indonesia will increase from 189TWh to 386TWh for 2022. The increase rate of power demand will be 8.4% at
annual rate. To meet this demand for electricity, the country requires additional power generation capacity of
59.5GW until 2022, but 17.1GW (29%) among this is in the situation that is not decided prospect of development.
For this reason, the Indonesian government has announced a policy to accelerate the development of power
supply and the power transmission & distribution network, including the coal-fired power plant, and the
government is welcoming the introduction of foreign capital in such capital investment. In order to strengthen
power development, the government recommends not only power generation by PLN, but also IPP, PPS (Private
Power Utility) by the private sector.
On the other hand, Japanese companies, has the technology and know-how of the operation management (O &
M) for the coal-fired power plants, such as super critical pressure (SC), and superior hardware technology,
including the circulating fluidized bed (CFB). In addition, it is possible to take advantage of Japan's public finance
for foreign investment.
This project, using these technical and financial resources of Japan, and taking advantage of usgin premises of
Asahimas Chemical Anyer factory located in West Java Cilegon City (ASC, Inc.), aims to built 600/450 MW scale
coal-fired power plant construction, suppling part of the power to PLN to contribute to Indonesia's power supply
and demand relaxation, contributing to formation of Japanese infrastructure projects, and strengthen the
international competitiveness of manufacturing industries.
2) ASCs Business Environment
Asahimas Chemical (ASC) Co., a consolidated subsidiary of ASAHI Glass Co., Ltd., is an Indonesia-based
chlor-alkali manufacturer of the largest class in Southeast Asia and engaged in integrated manufacturing from
caustic soda/chlorine to polyvinyl chloride. Due to the below-described background, how to secure electric
power resources has become a matter of pressing need for the company, which is now forced to confirm and verify,
as soon as possible, specific methodologies and feasibility of power plant projects counted as viable options.
a) Electricity tariff increases
In Indonesia, the electricity price has been set low in policy terms. But, given red-ridden management of the
state-run electric utility (Perusahaan Listrik Negara Persoro: PLN), electricity price hikes were decided in January
2014, though the price-increase targets were limited to large industrial customers alone. Based on the decision,
from 2014 through 2015, the tariff increases are scheduled as follows;
Power Contract Category 14 (over 30KVA)/some 60 companies: up 65%
Power Contract Category 13 (over 20KVA)/listed companies:

up 39%

For ASC (falling in Category 13), the tariff hikes are worried to produce grave effects on its business
operations.

b) Power balance crisis becoming conspicuous


Because Indonesian efforts to install power infrastructure fail to catch up with its surging electricity demand
from 2015 on, a power balance crisis is becoming conspicuous, thus creating an additional worrying condition to
the above-mentioned cost-up problem which should be overcome by some means.
3) ASCs business plans
As a result of the vigorous economic growth across the region, Southeast Asia is expected to mark long-run
expansion of demand for basic chemical products, indispensable goods for infrastructure. Backed by the strong
demand, ASC is planning to bolster its production capacity. By 2015 yearend, with additional capacities installed,
the companys production capacity of caustic soda (already expanded to about 500,000 tons/year in March 2014)
will increase to some 700,000 tons/year, up 40% over the current level, and that of polyvinyl chloride (PVC) will
almost double to about 550,000 tons/year.
Asahimas Chemical Co., currently producing the products cited below, has done a decision-making that its
caustic soda production capacity should be expanded to 700,000 tons/year by the end of 2015.
Caustic soda (NaOH) : Rayon, soaps/detergents, paper/pulp, chemicals
Vinyl chloride monomer (VCM) : PVC feedstock
Polyvinyl chloride resin (PVC) : PVC pipes, films, electric wire coatings
Because the electrolytic equipment to produce caustic soda and chlorine, the latter being PVC feedstock, is
characterized by heavy weight held by electricity cost, the above-discussed recent condition (rising
electricity-price problem) is now reckoned as a crucial subject that can pose so serious impediments to the
companys business development that it should be solved quickly and effectively.
For these reasons, ASC plans to offer its captive site for the proposed project of coal-fired power construction in
hopes to receive from the power plant, after it is built, less expensive power supply than that from PLN (state-run
electric utility).

(2) Basic policy applied when determining projects contents


When FS works were proposed on the formation of this project, etc., the technology model and output assumed
for the project were USC and 600,000kW in reference to coal-fired power plants currently in operation in Japan,
which includes Unit No. 5 (600,000kW; USC; bituminous coal-fired; main vapor temperature set at 600;
commissioned in July 2004) and Unit No. 6 (600,000kW; USC; bituminous coal-fired; commissioned in
December 2013) at Hirono Plant run by Tokyo Electric Power Co. (TEPCO).
As for coal ranks, assumed at the onset were a wide range of coal ranks, including Indonesias
indigenously-produced bituminous and subbituminous coals and overseas ones.
In the subsequent research process, through such efforts as literature studies and interviews made to JCOAL
and others, it was found that Indonesias energy policy positioned bituminous coals chiefly as exportable goods
and attached the importance to subbituminous coals for domestic use. In price terms, the use of subbituminous
coals was found reasonable as well.
Also, from the interview survey made to PLN last November, a suggestion was gained that a designed output of
USC, if fired by Indonesian subbituminous coals, needs to be more than 800,000 kW at least.

On top of it, literature survey results showed that, concerning USC fired by Indonesian subbituminous coals,
there were plans for building a plant of over a million kW in terms of single-unit capacity, but plans for a
single-unit capacity construction of under a million kW were completely absent (See the References below.)
Also, hearing from the Japanes experts and referring technical literature, we found that when using the juicy
Indonesian sub-bituminous coal, since the corrosion of the material is likely to proceed at high temperature and
high pressure, requires expensive materials to prevent corrosion, scale output scale of one million kW (1,000
MW) class is necessary.
From these results, it is found that a 600,000-kW USC running on Indonesian subbituminous coals is thought
not impractical at all in technical terms. Yet, without any records of actual operation nor planning, USC of over
600,000 kW is filled with unknown risks as a proven unit, which intensifies its character as a demonstration unit.
Consequently, with the use of Indonesian subbituminous coals premised, this FS is designed to cover not only
USC (Ultra Super Critical) but also including SC (Super Critical), Sub-C (Sub-Critical) and CFB (Circulating
Fluidized Bed).

(3) General Descriptions of the Project


1) General Descriptions of the Project
a) Type of utility: PPUPublic Power Utility
Statutory basis: New Electricity Act (Article 9-a, among others)
b) Power producer: SPC
Part of generated output is retailed from SPC to ASC via distribution lines within its plant site.
In parallel, part of generated output is sold from SPC to PLN.
c) Scale (generated output & retailing/power-selling capacities)
Generated output:

450/600 MW

Retailed from PPU (SPC) to ASC: 275 MW


Power sold from PPU(SPC) to PLN: 150/300 MW
Fig. 1 Power System Configuration

PLN Grid : 150kV


SWON

PLN Grid : 150kV

SWOFF

SWOFF

SWON
Backup

150
300MW

275MW
SWON

SWON

SWOFF

SWON

275MW
450
600MW

PPU

ASC
Power Load

Normal Operation

PPU

ASC
Power Load

During periodic inspection


and emergency

d) Technology types
Case 1
Technology: SC (Super Critical)
In general, the main steam temperature of supercritical (SC) is 566 or less, and the main steam
temperature of ultra-supercritical (USC) over 566 . The main steam temperature of this plant is
566 , so by definition this is supercritical (SC), but it is close to ultra-supercritical (USC).
Output: 600,000 kW x a unit = a total of 600,000 kW
PPU (SPC) retails 300,000 kW to ASC, and sells the remaining 300,000 kW to PLN.

Because ASCs power load lasts 24 hours in principle and remains stable relatively, the amount of
power sold to PLN stays constant except the periodical inspection time stated below.

In other words,

ASC can be a reliable power supply source for PLN.


Backups during periodical inspection time: Backups equivalent to 300,000 kW (to cover ASCs power
needs) is offered by PLN.
Case 2
Technology: CFB (Circulating Fluidized Bed)
CFB may also be applied to sub-bituminous coal of Indonesia of low calorific value.
Output: 150,000 kW x 3 units = a total of 450,000 kW
PPU (SPC) retails 300,000 kW to ASC, and sells 150,000 kW to PLN
Because ASCs power load lasts 24 hours in principle and remains stable relatively, the amount of
power sold to PLN stays constant except the periodical inspection time stated below.

In other

words, ASC can be a reliable power supply source for PLN.


Backups during periodical inspection time: During a periodical inspection, a unit (150,000 kW) alone is
halted and power sale to PLN is also suspended. In other words, ASCs plant load (300,000 kW) is
covered with the remaining two units (150,000 kW x 2 units = 300,000 kW).

2) Project Cost
aConstruction costs (design, procurement, construction works: EPC)
Tab. 1 Construction Costs (Case 1: SC 600,000 kW x a unit)
Roughly estimated cost
Item

In dollars
(US$ Mil.)

In Rupiah (Bil. Rp)

Total (US$ Mil.)

Boilers and environmental systems

197.8

439.9

232.8

Steam turbines and generators

130.1

289.3

153.1

47.4

105.4

55.8

Coal conveyor and ash treatment


systems

Electric/control equipment

36.6

81.4

43.0

Other incidental equipment

55.6

123.5

65.4

Civil engineering/installation works

77.9

173.3

91.7

545.5

1,212.8

641.7

54.5

121.3

64.2

600.0

1,334.1

705.9

7
8
9

Sub-total
Contingency (10% of sub-total)
Total

Exchange rate: US$1Rp.12,600

Tab. 2 Construction Costs (Case 2: CFB 150,000 kW x 3 units)


Roughly estimated cost
Item

In dollars
(US$ Mil.)

In Rupiah (Bil. Rp)

Total (US$ Mil.)

Boilers and environmental systems

132.0

482.9

170.3

Steam turbines and generators

86.8

317.6

112.0

31.6

115.7

40.8

Coal conveyor and ash treatment


systems

Electric/control equipment

24.4

89.3

31.5

Other incidental equipment

37.1

135.6

47.8

Civil engineering/installation works

34.2

125.1

44.1

346.1

1,266.2

446.6

34.6

126.6

44.7

380.7

1,392.8

491.3

7
8
9

Sub-total
Contingency (10% of sub-total)
Total

Exchange rate: US$1Rp 12,600


bInitial investment cost
Tab. 3 Initial Investment Cost (Case 1)
Roughly estimated cost
Item

In dollars

In Rupiah (Rp. Bil.)

Total(US$Mil.)

600.0

1,334.1

705.9

US$ Mil.
1

EPC cost (see Tables 1, 2)

Substation (additional)

1.5

18.9

3.0

Sundry cost1+2=5%

30.1

67.7

35.4

Interest during construction

93.4

0.0

93.4

725.0

1,420.7

837.8

Total

Tab. 4 Initial Investment Cost (Case 2)


Roughly estimated cost

In dollars

In Rupiah (Rp. Bil.)

Total(US$Mil.)

380.7

1,392.8

491.3

US$ Mil.
1

EPC cost (see Tables 1, 2)

Substation (additional)

1.5

18.9

3.0

Sundry cost1+2=5%

19.1

70.6

24.7

Interest during construction

53.8

0.0

53.8

455.2

1,482.3

572.8

Total

Exchange rate: US$1Rp.12,600

c) Running costs

Tab. 5 Running Costs (Case 1)


Roughly estimated cost

In dollars
US$ Mil.

In Rupiah (Rp. Bil.)

Total(US$Mil.)

Operation/maintenance

8.1

204.5

24.3

Fuel

0.0

1,517.8

120.5

Land

0.0

0.0

0.0

Premiums

Include in 1

Include in 1

Include in 1

Interest payment

5.38%/8.00%

0.0

5.38%/8.00%

Corporate tax

0.0

25%

25%

Exchange rate: US$1Rp.12,600


Tab. 6 Running Costs (Case 2)
Roughly estimated cost

In dollars
US$ Mil.

In Rupiah (Rp. Bil.)

Total(US$Mil.)

Operation/maintenance

5.6

142.3

16.9

Fuel

0.0

886.2

70.3

Land

0.0

0.0

0.0

Premiums

Include in 1

Include in 1

Include in 1

Interest payment

5.38%/8.00%

0.0

5.38%/8.00%

Corporate tax

0.0

25%

25%

Exchange rate: US$1Rp.12,600

3) Major Results of Preliminary Financial/Economic Analysis


Calculation results put FIRR of the proposed project at 11.5% (Case 1) and 14.3% (Case 2).
These results considerably outstrip Indonesias long-term interest rate (7~9%), thus suggesting excellent
feasibility of this project.
As one of the reasons, it is attributable to that the project is free from the running cost incurring in land use,
because the site for power plant construction has already been secured by ASC. Among others, availability of
relatively inexpensive subbituminous coals abundant in coal-rich Indonesia can be cited.
On top of these, the project is expected to allow electric power procurement for much cheaper price than
offered by PLN and, through inverse current of power into PLNs grids which are badly in need of electricity, the
project can contribute to alleviating Indonesias tightening electricity supply and demand.

In the meantime, while the calculations were made by setting the PLNs purchase price cheap at 656 Rp/kWh
(approx. 6 cents/kWh) identical to that for in-house power producers surplus output, the price is actually settled
by bilateral negotiations with PLN. Considering the projects contribution to mitigating PLNs grid problems, a
likelihood is that a higher price can be settled by negotiations. If so, with FIRR standing higher than calculated
this time, this project is likely to demonstrate even more excellent feasibility in economic terms.

4) Evaluation of Environmental and Social Impacts

a) Status-quo Analysis on Socio-Environmental Aspects


Building a new coal-fired power plant in Indonesia, though expected much to help easing the countrys tight
electricity supply-demand situations, is also feared as risk-prone, generally in such forms as worsening natural
environment, typcally air pollution, water pollution and greenhouse gas emissions, and the opposion by local
residents (due to undesirable changes caused to their office/living environment, land-expropriation troubles and so
on). Therefore, for successful implementation of the proposed project, adequate measures need to be taken by
putting such risk-prone subjects under careful consideration.

b) Improved Enviroment Expected from the Project


As an einvornment-improving effect of the proposed project, CO2 emissions from the proposed project
(coal-fired power generation: Case 1, Case 2) are estimated, of which outomes were compared with CO2
originating from tne Indonesian electrcity system.
Comparison of CO2 intensity
In 2011, CO2 intensity of the Indonesian coal-fired power plants stood at 1,065 g-CO2/kWh.
In comparison, CO2 intensity of the proposed project was estimated at 856 g-CO2/kWh in Case 1
(600,000 kW, SC) and at 988 g-CO2/kWh in Case 2 (450,000 kW, CFB). Ovibiously CO2 intensity of the
proposed project will be lower than the average registered by Indonesias existing coal-fired power plants as
much as by 20% in Case 1, and by 7% in Case 2.
CO2 reductions per annum
Focusing on Case 1 where larger CO2 reductions are likely, the calculation result shows that the proposed
project, if implemented, could reduce annual CO2 emissions by 1,026,012 t-CO2/year, that is, about 1.03
millon t-CO2/year.
c) Projects Impacts on Socio-Environmental Aspects
In order to assess likely impacts produced by the proposed project on socio-environmental aspects and identify
a broad range of items subject to socio-environmental cares, which would be essential at the next stage of the F/S
works, examinations were made in reference to the Check Lists printed in JICAs Guidelines to
Socio-Environmental Cares as well as the Check Lists in JBICs Japanese Bank of International
Cooperations Guidelines to the Confirmation of Socio-Environemntal Cares. As a result, the proposed project,
prudently planned based on a major premise that socio-environmental cares should be fulfilled by taking
adequated measures, is believed to have little grave environmental load nor produce negative impacts on the
society.

10

d) Outline of Host Countrys Laws Related to Socio-environmental Cares and Essential Measures Required for
Observance
n order to forward the proposed project in Indonesia, an environmental impact assessement (EIA) must be made
so as to show that the project meets major environmental requirements.

e) Vital Matters to Be Done by the Concerned Entities in the Host Country for Successful Project
While EIA preparation is under the jurisdiction of Cilegon City where the proposed project is located, the
project organizer or others responsible for the EIA preparation needs to make required applications/procedures
swiftly for obtaining any permits, approvals, licenses and whatever required.

(4) Project Schedule


The execution schedule of the project is as follows. This project is construction of the power plant executed in
existing plant premises. Therefore, there is no problem of concerning making the site safe. In addition, there are
too neither of problems concerning the influence on an environmental society, too. In other words, it is judged that
achievement that is smoother than the construction of a new power plant is possible.

Fig.2
(Fiscal Year)
(Quarter)

Project Schedule

2015
1

2016
2

2017
2

2018
2

2019
2

detailed FS
Planning
detailed design

SPC Formation
Securing
resource

of
Financing

IUPTL & WU
Obtaining
permits

of
AMDAL

PPA with PLN

Coal Supply Agreement


Contract
negotiation
EPC Selection and Contract
O&M
Selection
Contract

and

Construction Plant Construction


process
(Operation starting)

Source: Study Team

11

(5) The feasibility for the implementation


Subject project FIRR (Case 1: 11.5%, Case 2: 14.3%), it greatly exceeded Indonesia in long-term interest rates
(7-9%), financial feasibility high of project.
The practice of the project, there is no significant neck in restricting surface. In WU acquisition required for
PPU, especially understanding of PLN is the key. Others, electricity sales fee to PLN, including the negotiation of
the contract period, the adjustment of the PLN is important.
Another key is the funding. Adjustment of the inside and outside of the investment institutions, including the
JBIC is important. At that time, understood in terms of profit margin (IRR, etc.) is considered to be obtained easily,
other Japanese companies involved degree, I considered such as electricity sales contract period to PLN is the
focus of the adjustment.

(6) Superiority in Japanese companies technical, etc.


Japanese companies, for supercritical pressure power generation equipment and CFB power plant, in technical,
I is thought to maintain the superiority against foreign companies.
Has been to form a technology related to critical pressure / CFB power generation in strict environmental
standards for many years in Japan, the art of power generation facilities by Japanese companies is at a high level
in the world, and has a rich delivery record.
Although there are competition with Asian companies in terms of cost, reliability is maintained to the Japanese
companies in the technical aspects, including the quality of the equipment and O & M.

12

(7) Map of the project site


Fig.3

Project Map

Source : Google earth

13

Chapter1
Overview of the Host Country and Sector

(1) Overview of the target sector of project


For a sustainable growth of Indonesia, how to deal with energy and power development is as important as
infrastructure projects, such as roads, ports and airports. Today, in Indonesia, where energy shifts are already
under way from reserves-depleting oil to coal and gas, it is predicted that, by around 2020, the country should
have no choice but to depend on coal in covering most of its energy needs. At the same time, environmental
pollution should remain unchanged as a big problem confronting the country. The dilemma of fossil fuels and
environmental pollution is partly attributable to the Indonesias fortune that the country is blessed with rich energy
resources.

For the government, to keep stable electricity supplies as much as required for enabling its economic growth is
a challenge of critical significance and, therefore, its energy policy comprises of stepped-up energy diversification,
more efficient energy use, energy pricing policy and environmental problems resulting from energy use as its
principal pillars. When considering its energy supply-demand and environmental problems, Indonesia, given its
vast territories, needs to take the plural number of approach with its lands divided into Java and non-Java, the
former responsible for 70% of the countrys total energy consumption. For instance, in non-Java where
electricity demand remains low, rural electrification is counted as the top priority. Also, measures are required to
help increase the use of renewable energy sources specifically fitting to given areas each.
In addition, because Indonesias energy consumption per GDP unit is five times more than Japans, to promote
efficient energy use (energy conservation) is a matter of vital importance. Particularly, most difficult is energy
pricing policy which involves electricity tariff increases. As for energy conservation, it is essential to endeavor
for enlightening the next-generation young through educational/public relations efforts.

1) Energy Policy
Indonesian energy policy is generally described below. In Indonesia, National Energy Policy (KEN) and
Nations General Energy Plan (RUEN) are mapped out at the policy level, while Nations General Electricity Plan
(RUKN) and Electric Utility Supply Service Plan (RUPTL) represent energy plans prepared at the electric utility
level.
Fig,1-1

Outline of Indonesian Energy Policy


National Energy PolicyKEN
The latest version Version 2014
Nations General Energy PlanRUEN
Under development
Nations General Electricity PlanRUKN
Under development

Electric Utility Supply Service PlanRUPTL 2013-2022

The latest version Version 2013

Source: Study Team


17

a) New National Energy Policy (New KEN) (2014)


On January 28, 2014 a new national energy policy was approved by the parliament for the first time in ten years
and, on October 17, 2014, when signed by the former President Yudhoyono, the countrys basic policy law on
energy policy took effect. The newly-enacted New KEN was prepared by the National Energy Committee
(DEN), a council formed in 2009 under the Energy Act as a body to discuss comprehensive national energy policy.
It is chaired by the President and consists of 15 committees (7 from the Cabinet members, 8 from academics,
environmental specialists, consumer groups and industrial & engineering sectors).

New KEN specifies different shares to be held by different sources in total energy supply (energy mix) and puts
their numerical targets as shown below:

Oil: Under 25% in 2025, under 20% in 2050.

Natural gas: Over 22% in 2025, over 24% in 2050.

Coal: Over 30% in 2025, over 25% in 2050.

Renewable energy: Over 23% in 2025, over 31% in 2050

Among others, the nations energy policy targets were set forth as follows:

Energy elasticity (energy consumption growth/GDP growth): To keep elasticity in 2025 under 1 so as to
cope with the GDP growth target.

Energy intensity (energy consumption per GDP unit): To cut by 1% annually in the years to 2025.

Electrification rate: To be raised to 85% in 2015 and to nearly 100% by 2020.

Availability of residential gas use: To be increased to 85% in 2015.

Stance toward nuclear power plants: With nuclear power generation positioned as a final option, room for
possible introduction is left. It reflects the governments long-cherishing recognition that the country
should be in need of nuclear introduction in the long run.

Exports of resources: In anticipation of growing domestic demand, exports of indigenously-produced coal


and gas will be curtailed in phases and, ultimately halted completely.

In its effort to envisage an energy shape from now on, the Ministry of Energy and Mineral Resources, based on
the New KEN framework, is currently preparing the RUKN (2015-2040), or a new version of Nations General
Electricity Supply Plan. Also, the Presidential Decree on the National Energy Policy 2006 and Energy &
Mineral Resources Ministrys Vision 25/25, both prepared in the past, will be reviewed.
Reference: Presidential Decree on the National Energy Policy (2006)
In order to bolster the legal basis for the national energy policy, the Presidential Decree on the National Energy
Policy was promulgated by the President as a decree from the Executive Branch. According to it, on top of
energy elasticity (efficiency of energy use: energy consumption growth/GDP growth) to be kept under 1% by
2025, the government intends to promote the development of coal, natural gas and renewables so as to realize a
sharp cut in oil share in the primary energy supply mix. The planned primary energy mix by source is figured
out below.

18

Fig,1-2 President Decree-based Primary Energy Mix in 2025

5%

Coal
33%

Renewable energy

Natural gas
30%

17%

Oil
20%

Bio fuel

5%

geothermal
energy

5%

Others

2%

Liquefied coal

Source: Study Team (based on Presidential Decree on the National Energy Policy (2006))
Reference: Energy & Mineral Resources Ministrys Vision 25/25 (2010)
The Vision 25/25, which was a plan announced in 2010 originally by the Ministry of Energy and Mineral
Resources, revised the planned share of renewables for 2025 sharply upward to 25% from 15% specified in
Presidential Decree of 2006. Also, the Vision put that energy consumption in 2025 should be trimmed by 15.6%
by virtue of energy conservation and diversification efforts compared with the case without any measures taken
(estimated to total 3.3 billion tons oil equivalent).

Fig,1-3 Primary Energy Mix in 2025 Planned by Vision 25/25


Renewable energy

25%

Oil

30%

Natural gas
Coal

22%

23%

Source: Study Team (based on Energy & Mineral Resources Ministrys Vision 25/25 (2010))

19

b) Major Laws on Energy & Electricity


Energy Act (2007)
By 2007, without any laws capable of covering the whole of energy, Indonesia had an institution (legal system)
that allowed the government to control different energy sources by different laws, such as Oil & Gas Act,
Electricity Act and Geothermal Act. Because of the need for controlling the energy sector overall, the
government drafted on August 10, 2007 the Law on Energy (Energy Act), of which major provisions were
summarized below.

Energy resources to be controlled by the government (control/regulations)

Stable supply of energy (domestic supply preferred to exports)

Government subsidies granted to the poor

Promotion of resource development (domestic-procurement rate to be expanded)

Preparation of national energy policy (KEN)

Formation of national energy council (DEN)

Preparation of general energy plan (RUEN)(nationwide & by area)

Government supports for renewable energy supply/use and energy conservation efforts

New Electricity Act (2009)


The Law on Electricity (2009 No.30) (New Electricity Act) was enacted on September 8, 2009. Generally
following the former Electricity Act (1985 No.15) enacted in 1985, the Act, while declaring that the government
takes the responsibility of electricity supply (electricity supply services are under the national control and in
practice by the government), provides that in order to increase the nations electricity supply ability further, so
far as national interests are not harmed, other state-owned enterprises, public-run corporations, private firms,
cooperatives and citizen groups should be given the maximum possible opportunities for offering electricity
supply services, thus opening room for private participation. In regard to relevant procedures, the preparation
of the nations general electricity supply plan (RUKN) and electricity tariff revision, of which rights have
conventionally been granted to the Energy & Mineral Resources Minister and/or the President, are now subject to
the approvals of the parliament (local parliaments in case of specific plans for specific local areas).
Originally it was decided under the Law on Electric Utility Industry (New Electricity Act) enacted in
September 2002, to implement introduction of competitive market, splitting/privatization of the electric utility
industry, liberalization of electricity producing and retailing sectors, PLNs control on
transmission/distribution systems, formation of a committee to supervise the electricity market and decision of
transmission/distribution tariffs by the committee, appointments of electricity system managers and electricity
market managers and so on.

2) Energy Demand and Price Trends

a) Generated Output
PLN-involved total generated output in Indonesia as a whole (generated output by PLN+ purchased output by

20

PLN) has been changing as illustrated below. Compared with 93,325GWh in 2000, generated output nearly
doubled to 200,317GWh in 2012. Over the period Indonesias GDP growth was about 6.4% on average.

Fig,1-4 Indonesias Total Generated Output (Generated Output by PLNPurchased Output by PLN)

Source :PLN Statics, 2012

b) Electricity Sales Amount


Electricity sales amount, on the rise by an average 7.6% a year, reached 173,990.75GWh in 2012, up about 1.7
times over 100,097.47GWh registered in 2004. By consuming sector, the 2012 records show 41% went to
residential, 35% industrial, 18% business, 3% public, 2% government facilities, and 2% street lighting.
Compared with their 2004 figures, the residential sector marked the highest growth, up 2.9 percentage points,
followed by the commercial (business) sector, up 2.6 percentage points.

21

Fig,1-5 Indonesias Electricity Sales Amount by Sector

Source :PLN Statics, 2012

In Indonesia, most of electricity output is consumed in Java (particularly its western area where Jakarta is
located).
Tab.1-1 PLNs Electricity Sales Amount (GWh)
Year

Up/

2008
Area
Java Bali
Non-Java Bali
Total

down

Up/

2009

(%)

Up/

2010

down

(%)

down

Up/

2011

(%)

down

Up/

2012

(%)

down

(%)

100,774

5.4

101,319

0.5

110,309

8.9

117,593

6.6

128,513

9.3

28,244

0.9

33,263

17.7

36,988

11.2

40,399

9.2

45,478

12.6

129,018

6.4

134,582

4.3

147,297

9.4

157,993

7.3

173,991

10.1

Source : PLN Annual Reports, each years edition


c) Electricity Outlook
PLN, in its Electricity Supply Service Plan (RUPTL, 2013 edition), forecasts that from 2013 through 2022
Indonesias electricity demand will grow from 189 TWh to 386 TWh, which means an annual growth of 8.4%.
By 2022 the number of customers is likely to jump from 54 million to 77 million contracts (up 2.7 million yearly).
As a result, the electrification rate is likely to perk up sharply from 79.6% to 97.7%. By area, electricity demand
in Java/Bali district is projected to grow from 144 TWh to 275 TWh, up 7.9% per annum. The district of East
Indonesia will register even a steeper growth of over 10% from 18 TWh to 46 TWh. The district of Sumatra is
expected to show a demand growth from 26 TWh to 66 TWh, up 10.6%/year.

In Java/Bali district, the industrial sector accounts for the largest share in total demand at 38.5%. In East
Indonesia and Sumatra, industrial sectors in these districts hold rather modest shares at 11% and 15.8%,
respectively. Also, in these districts, residential demand dominates the whole, taking as much as 62% and 55%,
each.
22

Thus, most of the electricity demand growth originates from Java where Jakarta, the countrys capital, is located.
And yet, Indonesia is an archipelago country consisting of more than 17,000 islands and, with scant progress
made in local electrification in not a few islands, as much as about 20% households out of the whole are forced to
live without electricity.
Fig,1-6 PLNs Electricity Output Sold in 2012 by Area and Projections for 2022

Source :PLN RUPTL(2013)


(Note) Incremental electiricity demand from 2012 through 2022 is added up to 386 TWh on the assumption
that electricity demand would grow by an average 6.9%/year over the ten-year period.

d) Electricity Supply Plan


In order to satisfy electricity demand as much as required for supporting the Indonesian economic growth, the
country as a whole needs to install an additional generating capacity of 59.5 GW. It represents an average 6 GW
increase a year. In the RUPTL plan, PLN and IPPs are supposed to tap electricity supply of 16.9 GW (28%) and
25.5 GW (43%), each, while, currently, neither developers nor investors are decided for covering the remaining
17.1 GW (29%). In the RUPTL, the power plant system to realize for the electricity supply plan is designed as
follows;

Advanced coal-fired power generation: 37.9GW (63.8% of the whole)

Gas-turbine power generation: 5GW8.4%

Hydro power generation: 6.5GW11.0%

Geothermal power generation: 6.0GW10.2%

23

Fig,1-7

Electricity Supply Plan (for PLN & IPPs)

Source : PLN RUPTL(2013)

Next, according to the electricity demand outlook projected by the Ministry of Energy and Mineral Resources,
electricity needs over the 10 years from 2013 through 2022 will inflate by 7.4 GW/year on average and generating
capacity needs should exceed 100 GW by 2022. Also, focusing on the period from 2013 through 2031, the pace
of demand increase will average 12.4 GW/year, with generating capacity requirements amounting to 254 GW.
This surpasses Japans generating capacity in recent years. (According to the White Paper 2013, Japans
installed capacity totalled some 245 GW in 2011.)

Fig,1-8

Electricity Demand Outlook by Energy & Mineral Resources Ministry

Electricity demand (for increase) (GW)


installed capacity (GW)
generating capacity (GW)
maximum demand (GW)
electricity demand (TW)

Source : Materials of lectures by Ministry of Energy and Mineral Resources(September 2013)

24

e) Electricity Tariffs

In Indonesia electricity tariffs have been kept low conventionally thanks to subsidies. However, in order
to curb fiscal burdens stemming from the ballooning subsidies year after year, the parliament adopted
electricity tariff increases in January 2013. Pursuant to the adopted rule that electricity tariffs should be
raised by 3~4% every three months, and a total of 15% hike in electricity tariffs was made as of October
2013.
f) Industrial Electricity Tariff Increases/Automatic Tariff Adjustment System
The Ministry of Energy and Mineral Resources announced on January 21, 2014 that industrial electricity tariffs
(applicable to large business operators) would be raised from May 1 onward. It will be a 38.9% rise for the
contract capacity of over 200kVA (contract category I-3), with the tariff to be raised subsequently by 8.9% every
2~4 months. As for the contract of over 30,000 kVA (contract category I-4), a total of 64.7% rise is scheduled by
increasing the tariff by 13.3% every 2~4 months. As a result, incremental electricity tariffs paid by industrial
consumers are projected to reach a total of 8.85 trillion Rupiah.

Also, on the same day, or January 21, 2014, the parliament passed the government measure to introduce an
automatic electricity tariff adjustment system applicable to electricity consumers falling either one of the four
contract categories listed below.

Contract category R-3 (Residential of over 6600VA)

Contract category B-2 (Commercial of 6600VA~200kVA)

Contract category B-3 (Commercial of over 200kVA)

Contract category-1 (Government institutions of 6600VA~200kVA)

These four contract categories have received no subsidies since October 2013. Under the new system,
electricity tariffs for the four contract categories are planned to be linked to exchange rates, oil prices and inflation
rates. Though details of how to calculate individual tariffs need to be settled in the days to come, the shift to the
new system is expected to curb government spending by an estimated 142 billion Rupiah.

In addition, the Energy & Mineral Resources Ministry plans to expand the coverage of the automatic electricity
tariff adjustment system, under which electricity tariffs fluctuate based on economic indices and, from 2015
onward in the earliest case, electricity tariffs (applicable to a total of 17 categories), except those to residential and
commercial consumers whose electricity use is limited, are slated to be covered by the adjustable rating system.

g) Government Subsidies to PLN


Illustrated below are changes in government subsidies to PLN. The government subsidizes electricity tariffs
in order to make up for the deficits in generating cost, etc. that PLN is unable to cover with its tariff revenues, and
PLN receives the subsidy in a lump sum. Thus, electricity tariffs are kept cheap albeit soaring fuel costs, if any.
Meanwhile, the formula to calculate the government subsidies is provided in an ordinance issued by the Ministry
of Finance, whereby electricity selling prices and generating costs are compared by type of tariff and, when an
electricity selling price is found lower than cost, an amount of subsidy is calculated based on the gap.

25

Fig,1-9

Government Subsidies to Electricity Tariffs

(Billion Rp

120000
103331
100000

93178
78577

80000
60000

53720

40000

32909

20000

58108

36605

12511
4739

4097

3470

2002

2003

2004

0
2005

2006

2007

2008

2009

2010

2011

2012

Source: PLN Annual Reports, each years edition

By the early 2000s, partly in reflection to phased electricity tariff increases, the government subsidies have
remained within the range of 3~4 trillion Rupiah. Afterward, due to soaring oil prices combined with curtailed
government subsidies for oil products, fuel costs jumped sharply, which consequently drove the government
subsidies up.

The government subsidies, having dented briefly in 2009 thanks to falling fuel prices, advancing

fuel switching and so on, picked up again later and reached 103 trillion Rupiah in 2012.
Tab.1-2 PLNs Average Unit Cost for Electricity Sold(Rp/KWh)
Year

2008

2009

2010

2011

2012

Java Bali

634

661

697

709

732

Non-Java Bali

729

681

706

729

717

Total

655

666

699

715

728

\5.27

\6.42

\6.50

\6.22

\6.50

Area

(In yen)

The values in terms of yen equivalent were calculated based on the yearend (last day of December, each year).
Source: PLN Annual Reports, each years edition

Tab.1-3 Generating Cost (2012, Rp/KWh)


Hydro
155.87

Thermal

Diesel

Gas turbine

Geothermal

Combined

Average

810.14

3,168.58

2,362,99

1,121.50

1,001.80

1,217.28

Source: PLN Annual Reports, each years edition

26

h) State of PLN Management


Examinations of PLNs management unveil that the companys operating revenues increased by some 51%
between 2008 and 2012, whereby revenues have been up steadily year by year. And yet, due to skyrocketing
fuel prices and so on, the companys management should have been red-ridden without the government subsidies.

Tab.1-4 Total electricity sales revenue of PLNBillion Rp


Up/

Year

2008

Area

down

Up/

2009

(%)

Up/

2010

down

down

(%)

Up/

2011

(%)

down

Up/

2012

(%)

down

(%)

Java Bali

63,884

9.2

66,960

4.8

76,875

14.8

83,411

8.5

94,098

12.8

Non-Java Bali

20,603

16.1

22,678

10.1

26,099

15.1

29,434

12.8

32,624

10.8

Total

84,487

10.8

89,638

6.1

102,974

14.9

112,845

9.6

126,722

12.3

(In yen)

\680

\863

\958

\982

\1,131.8

billion

billion

billion

billion

billion

In July 2010 electricity tariffs were raised by 15%


Source: PLN Annual Report, each years edition

3Structure of Energy-related Industries


a) Outline of Electric Utility Industry
Under the present system of the electric utility industry, PLN and its subsidiaries as well as IPPs are responsible
for the power production sector, while PLN monopolizes the transmission/distribution sector. In the meantime,
PLN currently moves to encourage in-house company system and/or business-unit system, under which founded
were power-producing subsidiaries and general subsidiaries to be in charge of generation &
transmission/distribution in given areas (specified development areas like Batam, which hopes to be a second
Singapore), while individual departments are converted into business units (introduction of unit-specific
profitability-conscious operating system). Also, concerning electrification in rural areas, under the jurisdiction
of the Office of the Minister for Cooperatives/Small-Medium Enterprises(SMOC & SMEs), residents
organizations called Village Cooperatives (KUD) are sporadic nationwide, which are in charge of electricity
supply in remote rural areas isolated from PLNs power system.

Administrative organizations involved in the electricity sector include the National Energy Commitee (DEN)
responsible for energy development policy and general policy-making on energy use, the National Development
Planning Agency (BAPPENAS) in charge of national development policy and coordination, the Ministry of
Energy and Mineral Resources (MEMR) which supervises PLN and covers overall fields of resources and energy,
the Office of the Minister for State-run Enterprises which owns/manages PLN, the Ministry of Finance (MOF)
which is empowered to approve budgets, the National Energy Coordination Committee (BAKOREN) responsible
for energy policy-making and coordination, and the Indonesian Nuclear Power Agency (BATAN) engaged in
nuclear power generation-related research/development.

27

Electric Utility Industrys System

Fig,1-10

National Energy
Council
(DEN)

Development/others
policy-making &
coordination
National Development
& Planning Agency
BAPPENAS

Ministry of Energy &


Mineral Resources
MEMR
Regulation/superv
ision

Nuclear
research/development

Office of Minister
for State-run
Enterprises

Ministry of
Finance
MOF

Possess & control

Approval of
budgets

Nuclear
regulatory service

Nuclear Agency
BATAN

Office of Minister for


Cooperatives/Small & Medium
Enterprises
SMOC & SMEs

Nuclear Regulatory
Agency
(BAPETEN)

Guidance
/coordination

PT. PLN
Generation
Tnsmission/load
dispatching
Customer service

(Transmission/load
dispatching)
P3B Java Bali
P3B Sumatra

Power
wholesale
IPPs

Power
wholesale

Local gov.

(Generation)
Indonesia Power
Java Bali Power
Generation

(Generation/transmis
sion to specified
districts)
PT PLN Batam
PT PLN Tarakan

Support

Surplus power

Village
Cooperatives
KUD

In-house
generation

Consumers

Consumers

Consumers

Consumers

(Note) Generated output by any power producers other than PLN is required to be wholesaled to PLN in
principle.

But, under the former Electricity Act, from the aspect of stable electricity supply to industrial

complexes, four power producers, including PT Cikarang Listrindo and PT Krakatau Daya Listrik, are allowed, as
special cases, to supply electricity directly to the specified districts.
Source: Prepared based on Energy/Electricity Situations in Major Asian Countries 2011 appearing on Electric
Utility Industries Abroad, First Editions Supplement No. 2, published by the Board of Overseas Electric Power
Research.)

b) The Ministry of Energy and Mineral Resources (MEMR)


The Ministry of Energy and Mineral Resources is the leading organization which assumes the reins of overall
energy-related matters and is empowered to regulate/supervise state-run enterprises involved in energy business.
Beside the development of the energy sector, the MEMR is responsible for data provision/analysis necessary for

28

conducting researches and studies on energy & mineral resources. In 2010, in its effort to encourage the
development and promotion of renewable energy, the MEMR newly set up the General Bureau of New &
Renewable Energy and Conservation (DGNREEC). The formation of the new General Bureau (into which
incorporated are the geothermal department, separated from the former General Bureau of Coal and Geothermal,
and the energy utilization department from the former General Bureau of Electricity and Energy Utilization)
proves effective in strengthening its regulatory and supervisory powers over renewable energy overall.

The General Bureau of Electricity (the former General Bureau of Electricity and Energy Use), one of the
general bureaus comprising of the MEMR, assumes regulatory and supervisory responsibilities over the electricity
sector, and fulfills such roles as the electricity sector-related policy-making, standards/procedures-setting,
coordination of criteria, and technical guidance/evaluation. The Bureau is also responsible for the preparation of
the Nations General Electricity Plan (RUKN) which contains a host of information including electricity
supply-demand outlook, grid network plan, investment/financing policy, and new/renewable energy utilization
policy.

Fig,1-11 Officials Posted to MEMR (2013)


(The number of the staffs)

Source: Published information of the MEMR

c) State-run Electric Utility (PLN)


In Indonesia electricity production is undertaken by PLN, a listed company of which shares are possessed 100%
by the national government, its subsidiaries and IPPs (independent power producers), while the
transmission/distribution sector is monopolized by PLN. In Java/Bali area where operation turns to be huge in
size, the power production sector has two subsidiaries specializing in power generation (Indonesia Power and Java
Bali Power Generation), while transmission and distribution services are managed by PLNs in-house split units
(Java Bali Transmission & Load Dispatching Center (P3B Java Bali) and five distribution offices). Likewise, in
Sumatra, two power production business units (North Sumatra Power Generation BU, South Sumatra Power
Generation BU) and Sumatra Transmission & Load Dispatching Center (P3B Sumatra) and 7 local branch offices
are in operation. In other areas, business operations are under way in a vertically integrated style through local
branch offices. Among others, there are PLNs subsidiaries engaged in electricity supply in specified areas,
typically PLN Batam (in operation in the bonded area of Batam) and PLN Tarakan (in service in Tarakan Island in

29

the province of East Kalimantan).


Tab.1-5 PLNs Business Operation System
Power production

Transmission/substations
Load dispatching
Distribution/marketing

Java Bali
PLNs power plants
Indonesia Power
Java Bali Power
Generation
IPPs

Sumatra
North Sumatra Power
Generation BU
South Sumatra Power
Generation BU
IPPs

Java Bali
Transmission/Load
Dispatching Center
(P3B Java Bali)
5 distribution offices

Sumatra
Transmission/Load
Dispatching Center
(P3B Sumatra)
7 local branch offices

Others
9 local branch offices, and
PLN Batam
PLN Tarakan

Source: Prepared based on reference materials from the Board of Overseas Power Research, among others.
Under the companys president, PLN has 8 executive directors, out of which five assume the reins of
fuels/personnel general affairs, construction, materials, sales/risk management, and finance, while the remaining
three responsible for operations in the areas of Java/Bali, West Indonesia and East Indonesia, respectively.

In

October 2011, when the Yudhoyono administration shuffled its cabinet, the former President Dahlan Iskan took
office as the Minister for State-run Enterprises and the post of PLN President was succeeded by the former
Director Nur Pamudji (responsible for primary energy).

As a result of the start of the new administration in October 2014, massive shuffling was done among the
Energy & Mineral Resources Ministrys key officials, including the General Bureaus heads, and among PLNs
leading officials, including the president. Actually, in December 2014 the government announced public
invitations to these posts.

d) IPPs (Independent Power Producers)


In Indonesia, in the second half of the 1980s it became hard for PLN to cope with sharply growing electricity
demand single-handedly, and introduction of private capital into electric utility business (IPP participation) began
in 1992 onward. Today, IPPs account for 22% of Indonesias installed capacity.

Fig,1-12

Shares in Installed Capacities by Producer Types

(Note) PPU:Private Power Utilities


Source: MEMR, Jaruman Director-General Presentation Materials 2013

30

It is ruled that generated output by IPPs should be all purchased by PLN, and that private operators engaged in
IPP operations, when selling their generated output to PLN, are required in principle to do so through competitive
biddings. However, in such cases as renewables-based power production (micro hydro, geothermal, biomass,
wind, photovoltaic), surplus power, and supplies to electricity-stricken areas, IPPs can directly be
nominated without bidding (Note).

In February 2014, when interviewed by media, Director Jarman for the General Bureau of Electricity expressed
that he hoped 50% of the power construction budget would be funded by private capital.
(Note) Among others, as special cases, rich-experienced IPPs, when installing an additional capacity within the
same site (to be a more-efficient and less-environmental-laden capacity if the new one is identical to conventional
unit in size), are allowed negotiated contracts without bidding.

4) Generating Facilities and Network Systems: Status-quo and Plans


a) Nations General Electricity Plan (RUKN) and Electricity Supply Service Plan (RUPTL)
Indonesia has two specific plans related to power development; the Nations General Electricity Plan (RUKN)
and the Electricity Supply Service Plan (RUPTL). RUKN represents the countrys energy-policy-based general
power development plan, while RUPTL is PLNs plan for electric-utility operations to be prepared every year in
reflection to specific projects under way.

Formally RUPTL is expected to be mapped out based on RUKN as

amended, though the real state of things seldom stands in that way. Now that RUKN, revised in 2008, needs to
be approved by the parliament as ruled by the Electricity Act as amended in 2009, the MEMR-sponsored
government plan proposed to the parliament has not been revised to date and left without fully considered.
Currently under preparation is a revised plan (2015-2040), which contains the concept of how to increase
electricity tariffs.The latest version of RUPTL, or RUPTL2013 (2013~2022), was published in December 2013 in
such form as reflecting RUKN 2008.

Tab.1-6
Nations

General

Features of RUKN and RUPTL


Electricity

Plan

Power Supply Service Plan (RUPTL)

(RUKN)
Prepared by

Energy & Mineral Resources Ministry

State-owned electric utility (PLN)

(MEMR)
Outline

A 20-year general electricity plan

A 10-year power supply plan prepared by

mapped out by the national government,

PLN based on RUKN.

containing demand outlook, primary


energy,

power

development

plan,

required funds, etc.


Renewal

Revised every year (in principle)

Revised every year (based on RUKN)


Source: Study Team (based on RUKN,RUPTL)

31

The development plan under RUPTL2012-2021 puts electric power demand in 2022 at 358,000GWh
(compared with 173,990GWh sold in 2012), with the growth rate projected to be 8.65% per annum on average.
Additional installed capacities in 2012~2021 are projected at some 57.3GW in Indonesia as a whole, which means
an addition of an average 5.7GW yearly.

Fig,1-13 Plan for Power Supply Capacity Expansion

Plan for Power Supply Capacity Expansion


(2012 2021)

Coal fired power generation:38 GW


Geothermal power generation:6.3 GW
Geothermal power generation:6.3 GW
Gas fired power generation:4 GW
Combined cycle:2.5 GW
Others:0.28 GW

Source: PLN president lecture material in September 2013


The chart below illustrates a projected energy mix of Indonesias power supply capacity for 2022, which shows
such compositions as coal (65.6%), natural gas with LNG included(16.6%), geothermal (11.0%), hydro (5.1%),
and oil & others (1.7%).

Fig,1-14 Power Supply Capacity by Fuel

Source: PLN president lecture material in September 2013

32

ReferenceRecent Java/Bali Grid Systems Reserve Capacity


On May 7, 2013, the Java Bali grid system controlled by PLN recorded an all-time high maximum power (peak
power) of 21,968MW in net without in-house power included, and of 22,517MW in gross with in-house power
(2.5%) included. At present, the PLN-managed Java Bali grid system has an output capacity of 29,159MW (net),
which represents some 75% of peak power (net). That is, the systems reserve capacity turns to be 25% or so in
numerical terms. However, given such factors as aging deteriorations, decreasing hydro output during dry
seasons, periodical inspections and accidental outages, electricity supply-demand conditions can be analyzed as
follows:
Tab.1-7 Recent Java/Bali Grid Systems Reserve Capacity
Item

Capacity

Output capacity (net)

29,159MW

Output drown by aging


Dry-season hydro down

6,702MW

Inspections (thermal)
Outage, etc.
The-day supply capacity available

22,457MW

Maximum power (net)

21,968MW

Reserve capacity while running

489MW

Source: TEPCO Designs Jakarta Office

To sum up, the reserve capacity while running is found virtually absent, thus leaving the electricity
supply-demand balance in a very serious state. Meanwhile, PLN defines the case where the reserve capacity
while running (the-day supply capacity available the-day demand) drops below the maximum single-unit
capacity (Sulalaya Plants 600MW) as the state of SIAGA (emergency).

In the event the single-unit maximum

capacity falls down due to any accident on the plant side, PLN wont be able to keep an electricity supply-demand
balance and, therefore, makes it a rule to take a prior-confirmed procedure to cut part of the grid system from the
network (forced outage).

b) Two Crash Programs


In an attempt to cope with sharply growing electricity demand and to slash its oil dependence, Indonesia is now
driving forward two development programs, named Crash Programs, both designed to accelerate power
resources development to fuel the power plants running on non-oil fuels.

33

Tab.1-8 Outline of Crash Programs


1st Crash Program

2nd Crash Program (Early stage)

Period

2006-2009

2010-2014

Developers

PLN100%

PLN 44%(422 W)
IPP 56%(531 kW)

Developed

Approx.10,000MW

Approx.10,000MW

capacities

Incl.: Java Bali 6,900MW

Incl.: Java Bali 5,070MW

Others
Background
(purpose)

Power source

Emergency

3,100MW
power

Others

development

4,452MW

Emergency power development


Power source diversification

(chiefly in Java Bali)


Oil-free policy

Renewables introduction

Coal 100%

Renewables 54%, incl.


Geothermal 41%, hydro 13%
Fossil fuels 46%, incl.
Coal 36%, gas 1%, CC 9%

Legal grounds

Presidential Decree(No.71/2006

Presidential DecreeNo,4/2010

Required funds

Power sources: 8 billion US$

Power sources: 16 billion US$


Transmission capacity: 400 million US$

Source: Study Team (based on 1st Crash Program, 2nd Crash Program (Early stage))
1st Crash Program
Because PLN attached the importance most to speediness in power plant construction and the state-of-art
technologies were not required as far as certain technology levels were satisfied, most projects under the First
Crash Program were awarded to the Chinese firms in accordance with the policy that any firms offering the floor
price in bidding should be the winner. However, due to difficulties in raising funds in China as a result of
financial crisis, and delays in construction by the Chinese contractors, among other things, only a unit, or the No.
1 unit (320,000 kW) of Labuan Power Plant was put on stream within 2009. Moreover, the power plants already
commissioned have suffered frequent accidental outages caused by malfunctioning facilities, and the rate of
attainment remained at 64.2% out of 6,377 MW at 2013 yearend. In the meantime, the MEMR explains that
3,550 MW, or the remaining 35.8% of the originally planned capacity development, is slated to be completed by
2014/2015.
2nd Crash Program
In reflection to the intensifying issues of warming-gas emissions and coal-hauling infrastructure construction,
the Second Crash Program is characterized by stepped-up efforts for power source diversification, whereby the
importance is attached to the development of such renewables as geothermal (accounting for about 40% of the
program) and hydro, and IPP-based development is introduced as much as 55.7% of the whole.

Later, the Second Crash Program faced difficulties as well.

For instance, many of its projects failed to gain

government endorsement, of which works simply delayed due to poor financing. Some of them were forced to
34

cancel their development for such reasons as a gas supply shortage and insufficient preparation for geothermal
development. As a result, though the Second Crash Program was reviewed twice in January 2012 and in August
2013, with planned developed capacity expanded to 17,018 MW, none of its projects has been completed by 2013
yearend.

c) Investment Needs
Investments required for the development of such infrastructure as power plants, substations and transmission
capacities amount to an estimated 125.2 billion US$, in which included are 71.1 billion US$ for PLN projects and
the remaining for IPP projects in the private sector. Annual investments in the years from 2013 through 2022 are
shown below.

Fig,1-15

Investments Required for Power Development

Source: RUPTL

So far, many PLN projects have been implemented with financing by foreign governments-credits (two-step
loans). But, since 2006, this type of credits have been shrinking and a growing amount of bonds (local & global)
have been issued. While PLN has financed its projects under the Crash Programs mainly by the
government-guaranteed credits, PLN, in recent days, has been raising funds from multilateral bonds, like World
Bank-backed pumped power construction and JICA-based Java Sumatra interconnected transmission.

35

5) Trend about the Coal Resources

a) General Descriptions of Coal Resources in Indonesia


Coal Distribution, Resources and Reserves
Fig,1-16 shows coal distribution in Indonesia. It is Sumatra and Kalimantan where are rich of coal in huge
quantities, while coal is available little in Sulawesi nor in most-populated Java.

Fig,1-16

Coal Distribution in Indonesia

Kalimantan
South PapuaPapua

Sumatra
Sulawesi
Java

bituminous-subbituminous coals

lignite

Source: Study Team based on the document, the information that JCOAL provided

Indonesian efforts to prospect coal resources are still under way nationwide. That is, because new coal seams
are still discovered, the distribution map can be revised in the days to come.

Tab.1-9 contains Indonesian coal

resources and reserves by area. Coal resources are defined as total quantities of coal available in a given area,
while coal reserves mean the quantities of coal recoverable feasibly in economic terms.
Indonesias coal resources amount to some 105.2 billion tons, and reserves 21.1 billion tons. By area, the
larger portion is held by Sumatra and Kalimantan.

36

Tab.1-9 Coal Resources and Reserves (Mt)

Source: Indonesia Coal Book 2012-2013

It has turned out that Java and Sulawesi alike are poor of coal, of which scarcity can be noted clearly from the
coal distribution illustrated in Fig,1-16. On the other hand, the scarcity of coal resources and reserves in Papua
areas is attributable mainly to scant progress made in prospecting efforts there. Depending on prospecting
developments ahead, the areas still have the possibility to prove availability of coals which feature high calorific
values.

Fig,1-17 shows resources by area, and Fig,1-18 reserves by area.

37

Fig,1-17

Mt

Coal Resources by Area

120,000
100,000

80,000

Sumatra

JAWA

40,000

Kalimantan

20,000

East

60,000

Indonesia

0
Measured
Resources

Indicated
Resources

Measured Resources

Sumatra

JAWA

Kalimantan

East Indonesia

Total

7,699.18
2.09
14,537.00
53.09
22,291.36

Inferred
Resources

Indicated

Hypothetic
Resources

Resources

10,634.37
0.00
5,138.73
33.09
15,806.19

Total

Inferred Reserve

Total

Hypothetic Reserve

13,995.92
6.65
18,014.53
181.90
32,199.00

Mt)

20,153.72
5.47
14,635.97
95.72
34,890.88

52,483.19
14.21
52,326.23
363.80
105,187.43

Source: Indonesia Coal Book 2012-2013

Fig,1-18

Coal Reserves by Area

25,000

Mt
20,000

Sumatra

JAWA

Kalimantan

East

15,000

Indonesia

10,000

Total

5,000

0
Proved
Reserve

Sumatra

JAWA

Kalimantan

East Indonesia

Total

Probable Reserve

Total

Proved Reserve

Probable Reserve

904.80

10,644.45

Total

Mt

11,549.25

0.00

0.00

0.00

4,624.57

4,957.90

9,582.47

0.06

0.06

0.12

5,529.43

15,602.41

21,131.84

Source: Indonesia Coal Book 2012-2013

38

Special Features of Indonesian Coals in Qualitative Terms


Reportedly Indonesian coals are characterized by the high shares held by bituminous-subbituminous coals and
lignite. Yet, though in very limited quantities, anthracite is also produced and, in the central part of Kalimantan,
availability of high-rank coking coals is proven.Tab.1-10 shows coal resources and reserves by calorific value.
In regard to resources and reserves alike, over 80% proves to be coals having a calorific value of under 6,100
kcal/kg. Particularly more than 41% of reserves is found to be coals under 5,100 kcal/kg in calorific value.
Coal resources and reserves by rank are illustrated in Fig,1-19 and Fig,1-20, respectively.

It is noted high-rank

coals (High: 6,100-7,100) and ultra-high-rank coals (Very High: >7,100) are limited, but coal resources with a
calorific value of over 7,100 kcal/kg are put at a billion tons.

Tab.1-10 Coal Resources and Reserves by Rank (Mt)


quality

Resources

(kcal/kg)

Total

Reserve

Proved
Reserve Probable

Reserve

Total

(%)

Low(<5100)

21,227.63

20.08

7,603.88

1,105.40

8,709.28

41.21

Medium(5100 -6100 )

69,726.02

66.29

7,063.52

2,904.41

9,967.93

47.17

High(6100-7100)

13,220.61

12.57

861.73

1,410.44

2,272.17

10.75

Very High(>7100)

1,013.19

0.96

73.29

109.18

182.47

0.87

105,187.44

100.00

15,602.41

5,529.43

21,131.85

100.00

Source: Indonesia Coal Book 2012-2013

Fig,1-19

12.57%

Coal Resources by Rank

0.96%
20.18%
Low(<5100)
Medium(5100 -6100 )
High(6100-7100)
Very High(>7100)

66.29%
Source: Indonesia Coal Book 2012-2013

39

Fig,1-20

Mt

Coal Reserves by Rank

12,000
10,000

8,000
Low(<5100)
Medium(5100 -6100 )

6,000

High(6100-7100)

4,000

Very High(>7100)

2,000
0

Proved Reserve

Probable Reserve

Total

Source: Indonesia Coal Book 2012-2013

Next, examining coal resources by rank and area, Kalimantan reportedly contains high-rank coals of about 11.8
billion tons and ultra-high-rank coals of 940 million tons. Though not illustrated here, Papua is expected to have
high-rank coals of 9 million tons and ultra-high-rank coals of 300 million tons lying underground within the area..

Fig,1-21

Mt

Coal Resources by Rank and Area

80,000
70,000

60,000

Low(<5100 kal/gr)

50,000
40,000

Medium(5100 -6100
kal/gr)

30,000

High(6100-7100)

20,000
10,000

Very High(>7100)

0
Sumatra

JAWA

Kali
Sulawesi Papua
-mantan

Total

Mt

Sumatra

JAWA

Kali

Sulawesi
-mantan

Low(<5100 kal/gr)

18,990

0.9

2,220

0.2

Medium(5100 -6100 kal/gr)

32,040

10

37,360

220

1,040

11,790

10

High(6100-7100)
Very High(>7100)
Total

940
52,070

12.9

52,310

230.2

Papua

Total
21,000

90

70,000

13,000

30

1,000

129

105,000

Source: Indonesia Coal Book 2012-2013

40

The large part of Indonesian coal reserves are the coals of low calorific values. As aforementioned, coals
under 5,100 kcal/kg account for 41% of coal reserves. No formal standards are available for defining low-rank
coals. Accordingly, with the low-rank coals tentatively defined here as those of which calorific value is around
5,100 kcal/kg or less than that, their distribution is summarized. These coals can be counted as categorized into
subbituminous coals and/or lignite. Low-rank coals are found abundant in Kalimantan, South Sumatra, Jambi
and Riau. In recent years, the Indonesian government has been promoting the positive use of low-rank coals with
which the country is blessed. The governments move is also reflected on this project, coal-fired power plant
construction, which will be discussed later.

b) Relevant Moves to Mining Act in Indonesia


Mining Rights
It is a mining right to be important in discussing the trend of the coal mine. The mining rights, controlled by
the national and/or municipal governments, enable the governments to bind the operation of mines by law and
force them to pay taxes. This is not a special feature specific to Indonesia but it is common worldwide.

As in any other countries, there are two kinds of mining rights in Indonesia; prospecting rights and mining
rights. While these two kinds of rights are also applied to any minerals other than coals, their explanations are
made here by narrowing the target to coals alone.
The right of prospecting is the right to prove resources and reserves through prospecting efforts with such
techniques as boring. As a result of prospecting, potential concessions attract firms to be engaged in coal mining
and marketing. The right of mining and marketing coals is called the right of mining. These two kinds of
rights are issued by the national and/or local governments.

Currently existing rights can be grouped into two types. One is the so-called CCoW (Coal Contract of Work)
issued by the national government and concluded between the national government and major coal mines. The
other is the so-called IUP issued by local governments to coal companies. Of these, the former was abolished
under the newly-enacted Mining Act (2009 Presidential Decree No.4; UUNo4/2009 Tentang Pertambangan
Mineral dan Batubara). Existing CCoW, therefore, will be registered in the capacity of IUP, if any renewed
ahead.

IUP is further grouped into a few types. They include Mining Business Permits (IUPIzin Usaha
Pertambangan), Civil Mining Permits(IPR:Izin Pertambangan Rakyat), and Special Mining Business Permits (Izin
Usaha Pertambangan Khusus), but explanations of their details are omitted here.

CCoW has been eligible to hefty privileges so far, but, under the new Mining Act, the privileges set to diminish
gradually. In specific terms, because an application made from now on is nothing but an application for IUP, its
concession area will be narrower and its duration before renewed will be shorter, among other things. On the
other hand, the rate of the mine products tax (imposed in proportion to mining output) will be cut from 13.5%
currently applicable to CCoW to 37% now imposed on IUP.Generally speaking, the national government, so far

41

having given big privileges to a limited number of mines in return for heavy taxing on them, now aims at more
prudent control by reviewing its big powers and assigning the privileges to local governments.
Major Points of the New Mining Act
From now on, major contents of the new Mining Act are stated by item.
. Domestic Market Obligation
Under the act, enforced for the security of domestic coal demand, the mines are allowed coal exports only when
domestic demand is satisfied. Hence, the Indonesian government needs to determine the size of domestic coal
demand and, also, set the minimum ratio (%) of domestic coal marketing (supply) to coal output at the mines.
As a matter of natural course, some of the mines are producing coals of which qualities are suitable for the
domestic market, while others mining those which are more fitting to exports. For this reason, in order to fulfill
the domestic market obligation, the mines are allowed Quarter Transfers among them.
The amount of domestic market obligation is set in June every year in reference to the three indices below:
Coal demand projected by domestic producers and consumers for the next year
Coal production planned by coal companies for the next year
Energy & Mineral Resources Ministers rules on domestic coal demand and the minimum ratio of domestic
coal marketing
In relation to the above, with a watch-dog schedule installed, the firms failing to meet or observe their domestic
market obligation are imposed penalties.
As shown inTab.1-11, domestic supply amounted to 67.25 million tons in 2012 and increased to 74.32 million
tons in 2013. Of the supply in 2012, coal-fired power plants received 54.69 million tons, accounting for the
largest portion of 81%, followed by cement, textile and fertilizer which, when combined, received 12.23 million
tons or 18.1%, and foundry/metallurgy around 330,000 tons or 0.49%. Among the coal-fired power plants, the
largest is PLN (55.29%). IPP also claims a slice as big as 23.72%. Among others, cement accounts for 12.49%,
followed by textile/textile manufacturing at 2.87%.
The compositions changed little in 2013, topped by coal-fired power plants with 60.49 million tons or 81%,
followed by cement and textile/fertilizer with 13.09 million tons or 17.61%, and foundry/metallurgy 740,000 tons
or 1%. Among the coal-fired power plants, PLN remains as the largest at 49.29 million tons, which holds
66.32% of the whole.
In 2013 coal output is projected at 366.04 million tons and the minimum domestic coal marketing ratio is set at
20.30%. The minimum domestic coal marketing ratio has been set at 25% so far. But, because output grew
more than planned, and because domestic consumption did not grow so much as projected, the ratio of domestic
supplies to total coal output has been on the decline.

42

Tab.1-11

Domestic Supply Outlets under Domestic Market Obligation in 2012 & 2013
2012

Demand

(million tons)

2013

Gross
GCV
Calorific Value
kg/kcal)
(kg/kcal)

Demand

(million tons)

Gross
GCV
Calorific Value
kg/kcal)
(kg/kcal)

PLTU
coal-fired
power plants
1.PT.PLN

37.18

55.29

4.000-5.200

49.29

66.32

4.000-5.200

2.IPP

15.95

23.72

4.000-5.200

9.82

13.21

4.000-5.200

0.83

1.23

5.800

0.83

1.12

5.800

4.PT.NEWMONT NUSA TENGGARA

0.54

0.80

5.000

0.55

0.74

5.000

5.PT.PUSAKA JAYA PALU POWER

0.19

0.28

5.000

54.69

81.32

60.49

81.39

1.PT.INCO

0.14

0.21

5.900

0.20

0.27

2.PT.ANTAM.Tbk

0.19

0.28

6.600

0.19

0.26

6.600

0.35

0.47

4.500-5.000

0.74

1.00

A. 3.PT.FREEPORT INDONESIA

sub
total
B. foundry/metallurgy

2.PT.Krakatau Steel

sub
total

5.900

0.33

0.49

8.40

12.49

4.100-6.300

9.80

13.19

4.200-6.300

1.93

2.87

5.000-6.500

1.93

2.59

5.000-6.500

1.30

1.93

4.200-5.400

0.76

1.02

4.200

0.60

0.89

4.500-5.500

0.60

0.81

4.500-5.500

sub
total

12.23

18.18

13.09

17.61

total

67.25

100.0

74.32

100.0

cement
and textile/fertilizer
1. cement
C

2.

textile

3. fertilizer
4.

pulp

DMO
domestic
supply (Share of DMO)

32,85320.4%
328.53 (20.4%)

36,60420.3%
366.04 (20.3%)

Source: Published information of the MEMR

Next, shown in Tab.1-12 are the quotas to individual mines in 2012 and 2013. The data are on CCoW mines,
state-run mines (PTBA) and IUP mines. Focusing on 2013, the largest is KPC Mine (No. 25 in the table below)
at 10.76 million tons, or 14.5% of the whole, followed by Adaro Mine at 10.15 million tons, or 3.7% of the whole.
Among others, the mines of which quotas are over a million tons include Arutomin Mine, Berau Coal Mine,
Indominco Mandiri Mine, Insani Baraperkasa Mine, Kideco Jaya Agung Mine, Mahakam Sumber Jaya Mine,
Trubaindo Coal Mining Mine, and state-run Bukit Asam. They are all CCoW mines. On the other hand, none
of IUP mines are allotted over-a-million-ton quotas.

43

Tab.1-12
A
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
46.
47.

Quotas by Mine under Domestic Market Obligation in 2012 & 2013

2012

<CCoW>CCoW)

Quotas

PT Adaro Indonesia
PT Antang Gunug Meratus
PT Artmin Indonesia
PT Asmin Koalindo Tuhup
PT Astaka Dodol
PT Bahari Cakrawala Sebuku
PT Bangun Banua Persada Kalimantan
PD Baramarta
PT Barasentosa
PT Berau Coal
PT Borneo indonesia
PT Baturona Adimulva
PT Batualam Selaras
PT Bharinto Ekatama
PT Dharma Puspita Mining
PT Firman Ketaun Perkasa
PT Gunung Bayan Pratamacoal
PT Indominco
PT Indexim Coalindo
PT Indominco Mandiri
PT Insani Baraperkasa
PT Jorong Barutama Greston
PT Kadya Caraka Mulya
PT Kalimantan Energi Lestari
PT Kaltim Prima Coal
PT Kideco Jaya Agung
PT Kartika Selabumi Mining
PT Lanna Harita Indonesia
PT Mahakam Sumber Jaya
PT Mandiri Inti Perkasa
PT Multi Harapan Utama
PT Multi Tambang Jaya Utama
PT Marunda Graha Mineral
PT Nusantara Thermal Coal
PT Perkasa Inakakerta
PT Pesona Khatulistiwa Nusantara
PT Pendopo Energi Batubara
PT Riau Bara Harum
PT Santan Batubara
PT Singlurus Pratama
PT Sumber Kurnia Buana
PT Tanito Harum
PT Tanjung Alam Jaya
PT Tambang Damai
PT Tubaindo Coal Mining
PT Teguh Sinar Abadi
PT Wahana Baratama Mining
sub
total

9,826,328
614,146
5,695,824
726,739
0
71,650
204,715
767,682
0
4,517,450
767,682
245,658
12,283
0
0
511,788
899,619
2,988,841
92,122
0
1,001,329
229,383
71,650
111,570
9,274,007
6,960,316
46,768
614,146
1,740,079
675,609
473,916
106,313
242,149
204,715
552,731
427,445
0
307,073
552,731
516,957
123,853
685,796
138,183
0
1,576,307
200,130
921,218
55,696,899

44

2013

14.6%
0.9%
8.5%
1.1%
0.0%
0.1%
0.3%
1.1%
0.0%
6.7%
1.1%
0.4%
0.0%
0.0%
0.0%
0.8%
1.3%
4.4%
0.1%
0.0%
1.5%
0.3%
0.1%
0.2%
13.8%
10.3%
0.1%
0.9%
2.6%
1.0%
0.7%
0.2%
0.4%
0.3%
0.8%
0.6%
0.0%
0.5%
0.8%
0.8%
0.2%
1.0%
0.2%
0.0%
2.3%
0.3%
1.4%
82.8%

Quotas
10,151,832
860,065
6,700,209
860,065
94,607
0
206,416
860,065
344,026
4,902,374
344,026
516,039
20,642
349,531
61,925
516,039
695,824
0
430,033
2,677,901
1,255,696
240,818
59,861
516,039
10,760,942
6,536,499
154,812
602,046
1,892,145
774,059
963,274
206,416
344,026
259,740
782,832
860,066
20,642
258,020
688,053
688,053
148,365
619,247
103,208
258,020
1,224,906
129,010
825,633
61,764,047

13.7%
1.2%
9.0%
1.2%
0.1%
0%
0.3%
1.2%
0.5%
6.6%
0.5%
0.7%
0.0%
0.5%
0.1%
0.7%
0.9%
0.0%
0.6%
3.6%
1.7%
0.3%
0.1%
0.7%
14.5%
8.8%
0.2%
0.8%
2.5%
1.0%
1.3%
0.3%
0.5%
0.3%
1.1%
1.2%
0.0%
0.3%
0.9%
0.9%
0.2%
0.8%
0.1%
0.3%
1.6%
0.2%
1.1%
83.1%

B.

<PTBA>

2012

Quotas

PT Bukit Asam (Persero) Tbk.


C.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.

2,661,297

2013

4.0%

Quotas

2,236,171

2012

<IUP> IUP

Quotas

PT Admitra Baratama Nusantara


PT Arzara Baraindo
PT Bara Harmonis Batang Asam
PT Bara Kumala
PT Batu Gunung Mulia
PT Berau Bara Energi
PT Bhumi Rantau
PT Bukit Baiduri Energi
PT Binamitra Sumberta
PT Cahaya Energi Mandiri
KUD Gaiah Mada
PT Jembavan Muarabara
PT Kemilau Rindang Abadi
PT Karya Utama Banua
PT Kayan Putra Utama Coal
PT Kitadin
PT Lamindo Inter Multikon
PT Lembuswana
PT Mega Prima Persada
PT Mitra Jaya Abadi Bersama
PT Multi Sarana Avindo
PT Pipit Mutiara Java
PT Seeongga Sumber Lestar
PT Sinar Kumala Naga
PT Tunas Muda Jaya
PT Surya Sakti Darma Kencana
PT Telen Orbit Prima
PT Transisi Energi Satunama
sub
total
total

777,918
213,927
0
0
291,719
194,479
291,719
470,845
194,479
194,479
0
991,845
816,814
291,719
583,438
0
952,949
388,959
350,063
0
680,678
388,959
291,719
233,375
291,719
0
0
0
8,891,802
67,250,000

3.0%

2013

1.2%
0.3%
0.0%
0.0%
0.4%
0.3%
0.4%
0.7%
0.3%
0.3%
0.0%
1.5%
1.2%
0.4%
0.9%
0.0%
1.4%
0.6%
0.5%
0.0%
1.0%
0.6%
0.4%
0.3%
0.4%
0.0%
0.0%
0.0%
13.2%
100.0%

Quotas

688,053
189,214
195,910
448,449
258,020
172,013
258,020
599,036
172,013
172,013
299,756
877,267
722,455
258,020
516,039
295,002
842,864
344,026
309,624
217,098
602,046
344,026
258,020
206,416
258,020
279,434
225,418
311,480
10,319,752
74,320,000

0.9%
0.3%
0.3%
0.6%
0.3%
0.2%
0.3%
0.8%
0.2%
0.2%
0.4%
1.2%
1.0%
0.3%
0.7%
0.4%
1.1%
0.5%
0.4%
0.3%
0.8%
0.5%
0.3%
0.3%
0.3%
0.4%
0.3%
0.4%
13.9%
100.0%

Source: Published information of the MEMR

As a direction ahead rising DMO (Domestic Market Obligation) is likely. Given vigorous foreign investments
in Indonesia, construction of electricity-consuming facilities, notably manufacturing plants, is under way here and
there. As a result, the country is chronically short of electricity and, therefore, to strengthen DMO-related
measures, designed to solve the power shortage, still remains as a national priority in the days to come. Also,
from the perspectives of resource nationalism, to promote the domestic use of mineral products is popularly
supported by the Indonesian citizens, which can be cited as another factor to boost DMO rises.
. Coal Price-setting by the National Government (HBA & HPB)
The new Mining Act 2009 puts the coal selling price under a government control mechanism. Under the Act,
benchmark selling prices, set by coal rank (by brand) every month, are open to the public. Based on the prices

45

the government imposes mineral products taxes on individual mines. The benchmark selling prices are
calculated based on the four indices below:
Indonesian Coal Index
Platts
Newcastle Export Index
Newcastle Global Coal Index
The benchmark selling price for coal is popularly known as HBA (which stands for Hrga Batubara Acuan in
Indonesian language), which is set in reference to 8 coal brands. Then, taking the 8 brands as the standards, the
price for 60 brands is set, which is called HPB (Harga Potokan Batubara) and posted monthly together with HPB.
The prices are in US$ and in FOB/Vessel terms.

In other words, they are the prices after loaded onto vessels

offshore Indonesia, not representing the prices at mines.

46

Tab.1-13 shows HBA and HPB prices in September 2014. It is noted from the table that the prices are set
based on calorific value (kcal/kg), total moisture (TM%), total sulfur (TS%) and ash content (Ash%). 18 in
the table are major 8 brands (HBA). The highest-priced coal is Gunung Bayan, a brand from Gunung Bayan
Pratama Coal Mine, which features a calorific value of 7,000 kcal/kg and traded for 74.69US/t. On the other
hand, the cheapest-priced is a brand called LIM3000 with a calorific value of 2,995 kcal/kg and traded for
17.22US/t. Whats noteworthy in recent years is that there have been apparent moves to tag even such
low-calorie coals as under 3,000 kcal/kg, like LIM3000, previously not subject to pricing and barely traded for a
higher price than mining cost + a 25 margin.

47

Tab.1-13

HBA & HPB in September 2014

HARGA BATUBARA ACUAN (HBA) &HARGA PATOKAN BATUBARA (HPB)


BULAN SEPTEMBER 2014
HBA
HBA (US$/Ton)
Kualitas:
CV = 6322 kcal/kg GAR; TM = 8 %;TS =
0.8 % ar; Ash = 15% ar

69.69

FOB Vessel

HPB BATUBARA MARKER


KUALITAS TYPICAL
NO

MEREK DAGANG/BRAND

HPB
MARKER

CV

TM

TS

Ash

(kcal/kgGAR)

(%)

(%, r)

(%,ar)

(US$/ton)

Gunung Bayan I

7,000

10.00

1.00

15.00

74.69

Prima Coal

6,700

12.00

0.60

5.00

75.45

Pinang 6150

6,200

14.50

0.60

5.50

68.12

Indominco IM_East

5,700

17.50

1.63

4.80

57.11

Melawan Coal

5,400

22.50

0.40

5.00

55.74

Envirocoal

5,000

26.00

0.10

1.20

52.65

Jorong J-1

4,400

32.00

0.25

4.15

42.39

Ecocoal

4,200

35.00

0.18

3.90

38.82

CONTOH HPB BATUBARA LAINNYA YANG TERDAFTAR DI DITJEN MINERBA


KUALITAS TYPICAL
NO

MEREK DAGANG/BRAND

9 Gunung Bayan II

HPB
MARKER

CV

TM

TS

Ash

(kcal/kgGAR)

(%)

(%, r)

(%,ar)

(US$/ton)

7,000

12.00

2.00

10.00

71.01

10 Marunda Thermal Coal

6,600

11.00

0.50

10.00

73.58

11 Trubaindo HCV_HS

6,553

12.00

1.69

4.21

69.85

12 Medco Bara 6500

6,500

10.00

3.28

9.38

62.42

13 Trubaindo HCV_LS

6,423

11.50

0.71

4.76

72.57

14 AGM Waruba Coal

5,313

23.00

0.24

4.00

55.66

15 Pinang 6000 NAR

6,300

14.00

0.60

5.50

69.52

16 ArutminSatui 10

6,300

11.00

1.00

10.00

68.38

17 ArutminSenakin

6,250

11.00

1.00

12.00

67.05

18 Arutmin A6250

6,250

10.00

1.20

12.00

67.00

19 Mandiri A

6,210

10.00

0.70

4.65

71.51

20 Wahana Coal

6,200

12.00

0.90

10.00

66.97

21 Medco Bara 6200

6,200

10.00

4.00

12.00

55.26

22 IndomincoIM_West / 6500

6,171

15.50

0.76

5.22

66.55

48

KUALITAS TYPICAL
NO

MEREK DAGANG/BRAND

HPB
MARKER

CV

TM

TS

Ash

(kcal/kgGAR)

(%)

(%, r)

(%,ar)

(US$/ton)

23 TAJ Coal

6,200

10.00

1.00

14.00

66.46

24 Mandiri B

6,148

10.00

1.26

4.70

68.58

25 Trubaindo MCV_LS

6,143

14.00

0.76

5.20

67.38

26 SKB Coal

6,130

9.00

2.20

17.00

60.44

27 Baramarta Coal

6,112

9.50

0.95

13.00

66.48

28 Arutmin A6100

6,100

11.50

1.00

12.50

64.88

29 Insani Coal

6,050

19.00

0.15

3.20

66.06

30 BCS Coal

5,915

15.10

0.56

9.40

63.37

31 IndomincoIM_West / 6350

6,029

15.50

0.71

5.22

65.31

32 Bangun Coal

6,072

10.02

2.20

14.91

59.90

33 Pinang 6000

6,000

16.00

0.60

5.00

65.19

34 Indominco IMM_MCVHS

5,970

15.50

1.65

5.05

61.02

35 Multi Coal Low

5,950

16.00

1.00

7.00

62.29

36 Multi Coal Middle

5,900

16.00

2.00

7.00

57.78

37 Pinang 5900

5,900

19.00

0.90

4.50

61.06

38 Arutmin A5900

5,900

12.00

0.90

13.00

62.61

39 Multi Coal High

5,765

16.00

3.20

7.00

51.62

40 KCM Coal

5,730

10.50

0.90

20.50

58.85

41 TSA Coal

5,700

18.00

2.00

8.00

54.00

42 Tanito Coal

5,700

17.50

1.00

8.50

58.15

43 Mahakam Coal

5,700

17.50

1.00

8.50

58.15

44 Ebony High Sulphur

5,700

18.00

1.75

4.70

56.32

45 Pinang 5700

5,700

19.00

0.50

5.00

60.52

46 IBP 5500

5,500

20.00

1.00

7.00

55.12

47 Arutmin A5700

5,700

11.00

0.80

14.00

61.18

48 BSS Coal

5,520

10.00

0.45

15.50

60.73

49 LannaHarita Coal

5,500

22.00

1.00

6.00

54.20

50 Pinang 5500

5,500

21.00

0.40

5.50

57.46

51 Mahoni Medium Sulphur

5,500

20.00

1.30

4.70

54.84

52 Mahoni

5,500

20.00

0.80

4.70

56.84

53 Mahakam Coal B

5,400

23.00

1.50

8.00

49.82

54 Mahoni B

5,300

22.50

0.80

4.60

53.38

55 Kideco Coal

5,125

24.50

0.10

2.00

54.36

56 Agathis

5,100

25.00

0.82

4.50

49.95

57 LannaHarita Coal

5,000

27.00

1.20

6.00

45.73

58 IBP 5000

5,000

25.00

1.00

7.00

47.33

59 Sungkai Medium Sulphur

5,000

26.00

1.30

4.50

46.53

60 Sungkai

5,000

26.00

0.90

4.50

48.13

61 Sungkai High Sulphur

5,000

26.00

1.70

4.50

44.93

62 Arutmin A5000

5,000

22.40

0.54

8.90

49.97

49

KUALITAS TYPICAL
NO

MEREK DAGANG/BRAND

HPB
MARKER

CV

TM

TS

Ash

(kcal/kgGAR)

(%)

(%, r)

(%,ar)

(US$/ton)

63 AGM Warute Coal

4,350

33.00

0.40

4.00

40.92

64 IBP 4600

4,600

28.00

0.50

7.00

44.08

65 Bas Gumay Coal

4,400

35.00

0.50

4.96

39.48

66 IBP 4400

4,400

30.00

0.50

7.00

41.30

67 IBP 4200

4,200

32.00

0.50

6.00

38.26

68 PIC Coal

4,200

33.00

1.75

6.00

32.74

69 Borneo BIB

3,800

41.00

0.40

5.00

26.05

70 AGM Warutas Coal

3,800

40.00

0.15

5.23

26.52

71 PKN 3500

3,520

43.40

0.15

3.40

23.10

72 LIM 3010

3,010

47.50

0.60

5.30

18.25

73 LIM 3000

2,995

50.10

0.60

5.30

17.22

FORMULA HARGA PATOKAN BATUBARA STEAM (THERMAL)

Source: Published information of the MEMR

50

Fig,1-22 illustrates changing prices for HBA 8 brands in the last 4 years.

It is noted that the price, peaking at

early 2011, has been on the decline to date and now stands at around 60% of the peak.

Fig,1-22

HBA Price Changes (2009 ~ 2014)

Source: Study Team on the basis of the data that was excerpted from the HP of MEMR
. Export Restrictions
Surfacing now are moves to restrict mineral resource exports. Namely, in an attempt to urge producers of
mineral resources to put added values on their products, there are the moves to ban exports of minerals in
unprocessed/unfinished-product forms and/or to impose export duties on specified minerals. However, as far as
coals are concerned, DMO and the benchmark coal prices are counted as part of export restrictions in narrow
terms and, unlike other minerals, coals have been not imposed to date any specific regulations to enforce the
added-value requirement.

Coals are not subject to export duties either.

51

Export Bans on Unprocessed Minerals


The Indonesian government, having prepared legal arrangements for making added values on mineral resources
mandatory, promulgated a statute, or a 2012 Energy & Mineral Resources Ministerial Decree No.7 dated February
6, 2012, which required added values to be put on mineral resources. The decree stipulates detailed provisions
of what were stated in the new Mining Act (2009 Presidential Decree No.4) enacted on January 14, 2009 and the
Detailed Rules on Business Activities of the Mining and Coal Industries (February 1, 2010: 2010 Ministerial
Rules No. 22), the latter containing detailed rules for enforcing the former.

For example, the decree states that

mineral resource producers, to whom processing becomes mandatory in order to increase added values of minerals,
wont be able to export raw mineral resources from January 2014 and on. However, coals are not among the
minerals specified for the export bans. The mineral resources to which the decree is applicable are metallic
minerals, non-metallic minerals and ores.
Export Duties on Coals
Coal export duties, though under consideration in the past, were not realized due to objections raised by mines
and their related organizations. The failed effort was introduced in October 2005 by the-then Finance Minister
Anwar by issuing 2005 Financial Rules No.95. The Indonesian Association of Coal Producers, among others
presented the case to the court and, ultimately, given a judgment by the Supreme Court, the coal export duties
were formally abolished on June 13, 2006.Since then, in regard to imposition of coal export duties, the Indonesian
government has not mapped out any clear-cut policy.

It is attributable mainly to two factors below:

Because the royalty on coal, set at 13.5%, is higher than other mineral resources, many coal companies
have a recognition that they have already been heavily taxed.
The contract of CCoW mines contains a provision that, after concluded, their contract wont be
influenced by any new taxation subsequently introduced. As a result, only IUP mines would be subject to
new taxation, if introduced under current system, thus producing a sense of inequality among coal
producers. Also, if the government dared to impose export duties on CCoW mines too, fierce resistance
from CCoW companies should be unavoidable and the international confidence should be lost either.

Besides, it is pointed out, from the aspect of international competitiveness of coal exports, that export duties
contain serious negative factors. Coal-exporting countries like Australia are expected to continue the promotion of
their cross-border shipments, and growing coal exports from the U.S., Canada and Columbia are likely too.
Accordingly, if the Indonesian government introduced the export duties and the mines, as part of their cost, put
them on their export prices, international competitiveness of the Indonesian coals should be undermined much.
Then, dire outcomes, typically mine closures and job losses, could easily be imagined. Thus, the Indonesian
government has no choice but to be cautious toward the export duties.
. Revised Foreign Investment Ratios on Mines
Foreign firms to develop CCoW mines are required, under an Indonesian statue, to transfer 10 years after the
mine was developed 51% of the mining companys shares to their Indonesian partners. Some of the CCoW
mines subject to the provision, such as Adaro Mine, KPC Mine, Arutomin Mine and Kideco Jaya Agung Mine,
have already completed their stock assignments to domestic firms.

52

Under the new Mining Act, foreign firms whose mines start production under the newly-enacted mining act are
required to transfer to Indonesian domestic firms 20% of their companies shares six years after the
commencement of their commercial production, with the ratios to be raised to 30% in the 7th year, 37% in the 8th
year, 44% in the 9th year and 51% in the 10th year. The priority parties to which capital is to be transferred are
the national government, local governments, state-run corporations, local governments related corporations and
general domestic firms in this order.
. A Law on Low-rank Coal Users Incentives Incl. Coal-fired Power Plant at Mines
In its efforts to prompt the use of domestically produced low-rank coals, and on the belief that coal-fired power
plants, if built at mines, could increase added values of coals, the Indonesian government enacted a law on
incentive coal supplies in such cases. According to it, under the 2011 Statute No. 1348 promulgated by the
General Bureau of Minerals and Coals, with a calorific value of 3,000 kcal/kg drawn as the boundary, coal prices
at mines are decided as described below:
Coals over 3,000 kcal/kg;
To be set pursuant to the coal benchmark price (HPB). (However, because the benchmark price is in
FOB/Vessel terms, the price at mine must be adjusted by subtracting the costs of transportation, loading and
transshipment on the open sea from the benchmark price.)
Coals under 3,000 kcal/kg;
Mining cost + margin (25% of the mining cost)

In other words, a power plant at mine can take coals for a price pursuant to the coal benchmark price if the
calorific value is over 3,000 kcal/kg, or a price equivalent to the mining cost plus a 25% margin in case of coals
under 3,000 kcal/kg. The cost, which covers overburden cost, mining cost, transport cost, crushing cost, land
cost, reclamation cost, maintenance cost and taxes, among others, is determined by the Ministry of Energy and
Mineral Resources and subject to the ministrys reviews from time to time.

Coal prices at mine changed drastically on the date of September 22, 2014, of which details are shown in

53

Tab.1-14.
Changing points: The new pricing system for low-rank coals (raw coals) destined to IPP business, coal
reforming business, coal gasification business and in-plant power generation, all in operation at mine, were
renewed on September 22 this year, with their data shown in the table below. Particularly notable is the
calorific-value restriction of over 3,000 kcal/kg and bindings below are lifted.

54

Tab.1-14 Newly-set Cost at Mine


Newly-set Cost at Mine
1) stripping soil cost

US$2.41/BCM

2) transport cost (stripped soil)

US$1.71/BCM/km

3) mining cost

US$1.7/ ton

4) transport cost

$0.28//km

5) transport cost (to IPP's Coal Storage)

(IT is based on the Agreement between the operators)

6) process cost

US$1.98/ ton

7) depreciation cost

US$1.17/ ton

8) reclamation cost

US$0.27/ ton

9) security cost

US$0.07/ ton

10) local (community) measures cost

US$0.21/ ton

11) land cost

US$1.99/ ton

12) overhead cost

US$2.07/ ton

13) leased land cost

US$0.11/ton

14) tax

20.30%

15) margin

25%

Source: Study Team based on the hearing from the MEMR

The above-mentioned rates are set based on the best practice (in terms of, not average values, but the best
performance among major shippers and others) in Indonesia and subject to reviews from time to time in reflection
to changing economic environment and so on. Meanwhile, this formula is applicable only to the newly
commissioned projects from September 22 and on, and the raw coal prices for existing projects are determined
based on conventional formula.On the other, in regard to mineral products tariffs, taxable target-range/conditions
(ex. corporate tax, VAT), land lease and bidding system (for land use for mining operations) in nationally
preserved regions, relevant government offices have been preparing necessary procedures, which are now at the
final stage with their outcomes imminent.

For the Ministry of Energy and Mineral Resources, the promotion of low-rank coal reforming business is
among its priorities to be solved at the earliest possible opportunity, and the ministry intends to continue relevant
information exchanges. The table above, to be posted as a coal pricing guideline, shows that individual mines
wont suffer nothing by comparison even when calculating their mining cost with this formula.Newly inaugurated
President Joko Widodo (popularly known as Jokowi) cut oil subsidy from 8,500 INR to 6,500 INR/liter from
November 18, 2014 and on. Because the subsidy cut is very likely to cause soaring oil product prices ahead,
among the cost items listed above, those involving oil product consumption are expected to go up too.

c) Indonesian Coal Production Trends


Indonesia produced 213 million tons of coal in the first half of 2014. Despite the resource-nationalism-based
efforts to restrict coal exports, overseas shipments increased as much as 7.6% over the same period of the previous
year. Particularly exports to Southeast Asia where demand remains strong amounted to 158 million tons. If
going ahead as it is now, the exports should exceed an all-time high 148 million tons recorded in the first half of
2013 by 6.8%. Behind it, there are two major factors: One is Indonesian steaming coals are continuously used in

55

supplying fuels to energy-thirsty Asian power plants region-wide, and the other is major coal mining companies
are increasing their production in hopes to secure profits to cover falling coal prices worldwide. As a result,
albeit the will of the national government, Indonesia has become the top coal-exporting country in the world.

So far the Ministry of Energy and Mineral Resources projected total output in FY2014 at 421 million tons (flat
at the previous years level) on the assumption that a host of export restrictions could produce some effects.
Actually, however, FY2014 is likely to end in massive production increases by mining companies.
HBA for Indonesian coals with a calorific value of 6,322 GAR turned to be US$72.45 in July this year, down
US$1.19 from the HBA price in June. To cover the price down, the top six mining companies planned to boost
their production by 11.7%, which resulted in output increases. In June this year, the Indonesian Association of
Coal Producers warned that, if HBA continued to hover under US$73/ton, a large number of mining companies
should be forced to close their mines. The Association also insisted that, as a measure to cope with such a
situation, the government should offer mineral products tax revenues as the benefits to closed-mine employees.

Examinations of foreign coal markets around the world unveil that prices are on the decline. New Castle coal
benchmark price dropped some 20% from the years beginning to about US$69.90/ton now. The price is the
lowest in the last nearly five years. Obviously cheap crude oil worldwide can be cited as a major cause, and an
exit of the tumbling coal price trend is not seen yet.

d) Transport Means from Coal-producing to Consuming Areas


Explained here is transportation from general Indonesian mines to coal-consuming areas.
Primary transportation means from an inland coal mine is trucking to a river port. As for roads, it is required
to use those exclusively designed for coal transportation. Secondary transportation involves barges, which
forward coals to the open sea. Tertiary transportation is available in two ways. One is to transship coals to
vessels on the open sea or at a coal terminal before shipping to distant destinations. The other is short-distance
transportation to domestic outlets, in which barges are in use without transshipment. While barge transport is
usable for deliveries up to Bangkok Port, Thailand, further northbound deliveries usually involve transshipment to
vessels.

56

Fig,1-23 illustrates coal transportation means widely in use in Indonesia.

57

coal
mine

Fig,1-23

Transportation Means Widely in Use

truck
Truck

barges

liver
port

barges

open
sea

vessels

to
abroad

coal

terminal

vessels

to
abroad

barges

to
domestic

Source: Study Team

Indonesian mines are often situated in mountainous areas. Because large trucks are banned to drive on public
roads in Indonesia due to ill-installed traffic conditions, river-based transportation is forming the mainstream.
As for Fig. 8,trucking from a coal mine to a barge is required to use an exclusive road for coal transport, where
driving are large trucks generally capable of loading as much as 30 tons of coals.

Fig,1-24

Exclusive Road for Coal TruckingPhoto

Source: Study Team

After hauled by truck to a river port, coals are kept at a stockyard of the port, then forwarded to a barge by such
means as a belt conveyor for loading. In general a barge means an iron box of 300 feet X 100 feet in size which
is capable of housing some 8,000 tons of coals. With that type of barge coals are transported via river to the
open sea. Barge information is provided in Tab.1-15, which specifically offers general descriptions of two barge
specialist companies in Kalimantan.

58

Tab.1-15 Barge Information


Unit

RUSIANTO

AGUS STALINE

Quantity
No. of barges Tugboats
in service

Boat

Barges
Tug
Horsepower
specifications Gross tonnage

Maintenance cost

Rp/year

Maximum draft

35

147296

Rp

Fuel cost

102 (with 12 boats for


chartering)
8002,400

Construction cost

125 3,000 l/day

Maintenance cost

Rp/year

7~10 bil.
Approx. 1.5 bil. Around 10% of
construction cost

8,000 Max. 8,000 t

INR

112171
Max. 3083

8~9 bil. Constant regardless of


HP

l/h

Construction cost

1,0002,000

27.894.5 A 2,400-HP tug case

DWT
m

Remarks
35 Captive (with 12 boats
for chartering)

GT
m

Quantity

106 Captive (with 12 boats


for chartering)

HP

Total length width


depth

Barge
Loadage
specificaitions Total length width
depth

Remarks

200 1 HR = 0.1 l/h


8,000 Max. 8,000 t

94.0825.36.1 8,000-ton barge 320Ft 91.4424.385.5 8,000-ton barge 320Ft


case
case
5.5
22~25 bil.

5
15 bil. 300Ft-barge
(Singapore-made)
No maintenance for 5
years after
commissioned.

Source: Study Team based on the information provided by JCOAL

Fig,1-25

A River Port SceneryPhoto

(Left: Coals loading onto a barge by belt conveyor; Right: An overall view of a barge tugged by a tug boat;
Bottom: An overall view of a barge and a tug boat)

Source: Study Team

59

Coals loaded onto a barge are transported to a river mouth, then bound for consuming-areas. When exported
to far distant outlets, there are two ways; transshipped from a barge to a vessel offshore or directly loaded to a
vessel at a coal terminal. As mentioned before, transportation by barge is possible to around Thailand.
Fig,1-26 is a satellite imagery showing coals, stored at a river-mouth stockyard, are forwarded by a conveyor belt,
thus loaded onto a vessel near the river mouth. It is the way of direct loading from an inland coal terminal to a
vessel.

Fig,1-26

A Route from River-mount Stockyard to Vessel via Belt Conveyore

Source: Google Earth

As shown in

60

Tab.1-13 presented before, the government publishes coal selling prices in FOB/vessel terms offshore but does not
unveil incurring costs, such as truck-based primary transportation costs and barge-based secondary transportation
costs. Based on the results of its hearing surveys made to coal mines so far, we calculated these costs. Though
the mines, or the information sources, should be left unnamed, transportation costs are found as shown in
Tab.1-16.

Tab.1-16 Transportation Cost from Mine to Vessel


Route

transportation means

Mine - river port

30-ton truck

0.15

tkm

River port cost

belt conveyor

3.30

River port - demand area

8,000 Tonbaji

0.05

tkm

River port - large vessels - loading

8,000 Tonbaji product Kawafune

2.00

transportation cost (US

Source: Study Team based on the information provided by JCOAL

(3) Situation in the target area


1) Development Risks
In Indonesia, which has continued to rapid economic growth, while a number of business opportunities exist,
there is also a wide variety of development risk.

a) Conditions of the Domestic Economy


The Seventh President Joko Widodo (graduated from Indonesias renowned University of Gadjah Mada), who
took office in October 2014 to succeed over a-decade-long reign by the Yudhoyono administration, originally was
a successful businessman in furniture exports, and later achieved outstanding political careers as the Mayor of
Solo and the Provincial Governor of Jakarta. He is a pro-commoners politician, who trumpeted political reforms
and an economic revival as his pledges during the presidential campaign. But, the media at home and abroad
reported the economy would force him a hard fight.1

By now, President Jokowi showed a will to carry out port, railway and electricity-related infrastructure projects
nationwide and, particularly, hammered out a policy to slash distribution costs by concentrating its efforts on
marine distribution infrastructure projects because Indonesia is an archipelago country consisting of 18,000-less
islands. In addition, announced was introduction of such mass transportation systems as subways into the six
cities, which include Jakarta, Semarang, Bandung, Surabaya (Bali), Medan (Sumatra) and Makassar (Sulawesi).
In regard to expropriation of land, which posed a bottleneck of investment, the President showed an attitude to
break a stalemate, if any, through the Presidents positive involvement by himself, while referring to his successful
1

The News Week, a US weekly, carried an article entitled A Disease of the post-China Indonesian Economy, which was
summarized below.:
With its growth halted by the Asian currency crisis in 1997, the Indonesian economy has been depending on subsidies, of which
costs have been just swelling to date. The growth rate in the first quarter of this year turned to be 5.2%, a four-year low. The ratio
of fiscal deficits to GDP is nearing 3%. Above all, fuel subsidies account for nearly 16% of government spending today. The
generous subsidies squeeze government budgets, leaving little room for funding infrastructure projects. While international
organizations urge the country to increase infrastructure investments by raising fuel prices, over 100-million Indonesians (out of its
total population of 250 million) are living for less than US$2 a day. Already in the past, fuel price increases in an attempt to curb
subsidies have invoked protest demonstration and social unrests, which triggered the toppling of long-standing dictatorship
governments. Drastic reforms can prove fatal. (Source) News Week, dated August 12, 2014

61

experience of loop-highway construction during his days as the Governor of Jakarta Province by overcoming
land-expropriation troubles by repeating dialogues with opposing residents. In specific terms, revealed are the
measures to install infrastructure and improve investment environment, such as one-stop service center where all
procedures required for foreign investment can be taken and the rule that basic business permits should be judged
within three days.

In November 2014, firmly taking a swift step to ax the so-far generous fuel subsidies, among others, the
President set to move toward infrastructure construction and improved investment climate, which can be cited as
Indonesias long-standing challenges. Besides, to dissolve account-balance deficits in structural terms requires
efforts to bring up an exports-oriented manufacturing industry of labor intensive type.
On the other hand, as for the financial market, banks tight liquidity and resultantly rising interests, as well as
the accumulation of domestic financial assets are worried as serious subjects to be solved. Among others,
mal-distributed economic activities pose a serious bottleneck on supply side. That is, the countrys production,
employment and consumption concentrates on Java, particularly its western area (in and around Jakarta) which
covers a mere 7% of the nations lands. From investors perspectives, Java can be counted as forming an
efficient market, but to expand industry and jobs throughout Indonesia, characterized by vast lands, is an
ambitious challenge in political terms too.

b) Exchange Risks
Around 2000 Indonesia suffered political and social unrests and, as a result, the Rupiah exchange market was
infected with a roller-coaster volatility. However, from 2004 onward, when the Yudohoyono administration was
inaugurated, the Rupiah market has turned stable, backed by stabilized social conditions and restored confidence
among investors.

In 2009 the Rupiah plunged briefly due to the Lehman shock but restored to the pre-shock

level by yearend. Thus, the Rupiah exchange market remained stable during the last decade except a brief
moment immediately after the Lehman shock. This is attributable to a few factors. First, unlike the Asian
countries based on an exports-reliant growth model, Indonesia takes a local demand-led model. Second, political
and economic conditions have been stabilized under the Yudohoyono administration. Third, the current-account
surpluses increased thanks to growing exports, notably coal and palm oil.

Although the Rupiah, very volatile against the dollar and the yen, seems to be highly risk-ridden, Indonesia
depends nearly 70% of its GDP on domestic demand, thus being less vulnerable than other ASEAN members to
economic volatility in the West. However, an examination of Indonesias cross-border imports/exports reveals
that the value of IDR against the dollar plunged by 34% in the last four years. Though export terms in dollars
are turning favorable, some firms indebted in dollars are suffering so big exchange losses that should carefully be
watched.
Meanwhile, as late as December 2014, IDR marked a 16-year low, an about 11% drop from this years highest
recorded in April, and the Japan-affiliated manufacturers reliant on imported feedstock are now forced to have
some measures to tackle their cost increases. Because it results from the strong dollar worldwide, local

62

economists, while asserting the rate can fall to the 13,000~15,000 IDR, take an optimistic view that the US
economic recovery should have positive effects on the Indonesian export industries.

c) Natural Disasters
Because Indonesia, just like Japan, is situated on the Pacific-Rim volcanic belt, the country is natural
disasters-prone, such as earthquakes, tsunamis, volcanic eruptions and floods. According to a JAIC report, just
in the ten years from 1999 through 2008, natural disasters killed some 180,000 citizens, with an additional about
8.4-million suffered, and caused economic damages as serious as amounting to US$10 billion. Indonesia is an
earthquake-stricken country hit by earthquakes of over the magnitude 4 class as frequently as 400 times a year on
average. Furthermore, Indonesia has 129 active volcanos. Of them, including Mt. Merapi (in central Java), 17
volcanos are showing rumbles. Also the country is hit by frequent tsunamis resulting from earthquakes and
volcanic eruptions. Big earthquakes of the magnitude 7~8 class occur as frequent as once a year, with the latest
one, scaled at magnitude 8.6, braking out in April 2012 offshore North Sumatra. The area hit by the latest big
quake is the same as the one devastated by the Great Quake Offshore Sumatra in 2004 of which victims numbered
as many as some 300,000 including the missing.

In the meantime, some areas of Indonesia belong to the Asian monsoon belt, where heavy raining during rainy
seasons often causes floods and submersion-linked damages every year.

For instance, the outbreak of floods in

January 2013 escalated into as serious state as causing the plural number of municipal authorities, including the
Metropolitan Jakarta, to proclaim a state of emergency.
(Source) JICA, Introduction to Japans Economic Cooperation to Indonesia in Various Fields (Field of Disaster
Prevention)2

d) Policy Changes
In the past Indonesia has propelled its economy with oil exports and oil-related industries as the prime mover.
Then, in more recent years, the country has been bolstering its economic growth by developing manufacturing
and service sectors. The Indonesian government has mapped out a host of aggressive industry-development
policies, including plans for manufacturing clusters, which involve electrical machinery, auto parts, textiles,
agricultural/fishery processed products, etc., to be installed in such areas as Java, North Sumatra and Sulawesi.
Key economic measures of the former President Yudohoyono were the decisive promotion of free trade and the
invitation of foreign firms.

For instance, his administration entered into the EPA (Economic Partnership

Agreement) with Japan and realized the conclusion of China ASEAN FTA (Free Trade Agreement) with China.
Likewise, concerning AFTA (ASEAN free trade area), proposed tariff cuts within the area were achieved as
scheduled. Given the improved climate for corporate management, a growing number of Japan-affiliated firms
have been launching into Indonesia to set up production centers or expand their basis there.

The advent of Mr. Jokowi, installed as the new President in October 2014, was a breakthrough event in the
Indonesian politics, still overshadowed by the long-standing elitism. It was a grass-root movement involving
more than a million volunteers in total that supported his presidential campaign. Yet, because the Indonesian
2

Source: JICA, Introduction to Japans Economic Cooperation to Indonesia in Various Fields (Field of Disaster Prevention)

63

Democratic Party of Struggle (PDI-P), where he started his political career, occupies only 20%-short at parliament,
the President is likely to face rough going in his parliament management and there is no knowing what will come
for his fiscal reforms. At any rate, in order to establish a redistribution system, a crucial challenge for Indonesia,
it is essential that Jokowi proves to be a competent President. Aside from a high pile of subjects, ranging from
repulsions of the vested-interests class against the President-led reforms to much-needed infrastructure projects,
typically roads and ports, there is no question that the new administration will cause a stir to the Indonesian
political culture.

e) Riots and Other Anti-social Actions


In Indonesia, few shocking incidents had happened after the Bali suicide-bomber terrorism in October 2002
(which killed 202 citizens including foreign-tourist visitors to a discotheque. But, in July 2009, at two hotels in
Jakarta City bombs exploded simultaneously, where nine citizens, including six foreigners, died and many got
insured. Focusing on terrorism in Indonesia in recent days, few damages by massive terrorism have been
reported thanks to intervention by the Indonesian Army and the police, but given continuous development of small
and medium demonstration and terrorism in size, precautions against terrorism are essential.

Jemash Iskamiya, an Indonesia-based international terrorist group, is said to be tied with Al Qaida, the terrorist
group responsible for the September 11 terrorist attacks, which means the existence of threats of terrorism remains
unchanged today. In addition, in Indonesia, militant separatists in Ache and Papua, where they have been
demanding their independence from Indonesia for years, are feared to cause social unrests, such as riots and
terrorism, within the provinces. Thus, Indonesia is confronted with not merely a menace of international terrorist
groups but also a threat of domestic separatist terrorism.

As for riots, the Jakarta riot in 1998, which destroyed the Chinese town in Jakarta, was an incident which
reminded many of that the Indonesian economy was still controlled by the Chinese merchants. Indonesia has the
largest number of the Chinese residents in the world. Though discrimination within the government and in the
society has been blurring gradually, no doubt this kind of threats persist even now. And yet, given such
developments as a Chinese-language media, previously prohibited, came officially on stage, a Chinese-Indonesian
was elected as the Deputy Governor of Metropolitan Capital Jakarta, and Chinese-Indonesians were appointed as
the State Ministers, democratization has steadily got rooted.

Lately, due to skyrocketing crude oil prices in 2012 squeezed, fuel subsidies squeezed the government budgets,
and a 33% hike in the fuel price announced by the government provoked a violent demonstration joined by more
than 80,000 citizens. But, it had little influence on citizens life partly because not a few participants in the
protest march were paid-protestors for 500 Rupiah/day each,

Source : The Ministry of Foreign Affairs, Website on Overseas Security (Guide to Security for Japanese Residents, Jakarta Japan
Club)

64

Fig,1-27 (Reference) SWOT Analysis on Indonesia (2014)

[Strengths]

[Weaknesses]

250-million population with rising incomes and enormous

Flagging exports/costly imports; especially oil/gas imports

potentials of the domestic market

result in continuing trade deficits in 2014.

Relatively stable economy less vulnerable to global

Corruption remains as a big problem.

economic shocks

2014 turned to be highly political.

Contribution to democracy-based politics

Products dependent on the overseas economies are easily

Relatively steadfast banks; major banks are elastic to global

influenced by the world commodity prices and have grave

economic shocks.

impacts on exports and GDP growth.

General election in

[Opportunities]

[Threats]

2014 general election spurred domestic economic activities,

Persistent uncertainty prior to the general election, which can

of which contribution to GDP growth projected at 0.2% by the

put a brake on local & overseas investments and

Central Bank.

asset-management investments.

Inflationary pressures in 2013 converged in 2014, with

Fears for political instability, though less likely, still exist.

general purchasing power expected to rise.

Potential flees (of short-term capital) caused by US monetary

High returns and giant size of the market offer an attractive

easing still continue in 2014.

investment target to investors.

Rises in electricity tariffs and minimum wages can

World commodity prices are expected to be improved in

discourage investors.

2014.
Continued Abenomics can strongly lead to capital inflows
into emerging countries.

Source : Indonesias Economic Projections for 2014 and Electricity


Condition in Indonesia, DEN, Jan.,2014

65

2) Environment around the proposed project site


Cilegon, where the site slated for the proposed project (within the site of Anyer Plant owned by Asahimas
Chemical Co.), is a coastal industrial city situated in the westernmost Banten State in Java island. It is the center
of Indonesias heavy chemical industry where many steelworks and petrochemical plants are located.
Fig,1-28

Peripheral (Cilegon - Krakatau Steel Industrial Zone) of industrial clusters

Suralaya power plant

Krakatau POSCO

Pertamina

Krakatau Steel

Asahimas Chemical

Chandra Asri Petrochemical

Source : Google map

This area, where Krakatau Steel Co., the largest steelmaker in Southeast Asia, is located, forms Krakatau Steel
Industrial District. Aside from Krakatau Steel Co. and Krakatau POSCO Co., many plants run by such
companies as Siemens AG, Asahimas Chemical Co., Chandra Asri Petrochemical Co. and Pertamina (state-owned
oil/gas corporation run by the government of the Republic of Indonesia) are integrated in this area and, thus, the

66

zone of this area has been developed well as an industrial district.In addition, as an industrial infrastructure,
Suralaya power plant, Krakatau Tirta industrial water treatment plant, (Ferry Terminal to cross to Sumatra) Merak
port, there is a Sunda Strait Bridge (plan).

67

Chapter2
Study Methodology

(1) Contents of FS works


1FS contents
The FS works, made on a project to secure a new power resource by constructing a power plant in the site of
ANYER plant owned by Ashahimas Chemical Co. (ASC) in collaboration with PLN as well as private firms at
home and abroad, was designed to examine/verify an optimal approach (incl. project system/financing scheme)
and sundry conditions (on such aspects as institution/policy, technology, environment, and finance & economics)
for the planned project.

Fig. 2- 1

ANYER Factory

Research items of this FS work are:

General information including those on electric utility sector

Status-quo of existing capacities (power plants, substations, grids) and electricity market

Physical properties of coals to be used as fuels and their supply sources

Conceptual design, preparation of candidate equipments specifications, preparation of roughly estimated


construction costs, roadmap for project implementation in broad outline

Examinations of socio-environmental aspects

Permits-related situations in Indonesia

Indonesian partners capabilities for project implementation

Financial/economic analysis

Prospects for project financing

Japanese firms advantages in terms of technology, among others

2FS target
The spot subject to the FS work is the site of ANYER plant owned by Asahimas Chemical Co. (ASC) (Desa
Gunung Sugih Jl. Raya Anyer Km 122 Cilegon 42447 Banten).

70

Fig. 2- 2

Location of the project

71

(2) Research methodology/system


1Research methodology
During the FS works, chiefly based on first-hand data gathering in Indonesia, researchers visited the planned
project site and made interviews to relevant organizations, and so-collected information were put to prudent
analysis/reviews. As for research works in Japan, a wide variety of materials and information collected in both
Japan and Indonesia were well-organized and put to analysis. The outcomes of such works were used in a wide
range of subsequent works from preparation of the project design in broad outline, cost integration and
roadmap-making to economic/financial analysis and socio-environmental assessment, of which output was
summarized in the form of a report. In addition, to collect technological information of the most advanced
coal-fired power plants, researchers visited relevant firms as well.

2Research system
Fig. 2- 3

Research System

E&T Research Institute, Inc., proposer of the project


President
Masami Nakakubo

Director General
Jiro Uchida
Director
Seiji Tada

Research Department

Energy and Environment Group

(Manager) Miharu Kishioka

(Principal reseacher) Hiroyuki Hayashi

(Research Advisor)
Hiromasa Iwasa

Energy and Environment Group

(Research Advisor)
Tadao Ishikawa

Energy and Environment Group

(Chief researcher) Hirokazu Yonezawa

(Visiting researcher) Tomoyuki Nakamura

Energy and Environment Group


(Principal reseacher) Yasuhiro Arakawa

Energy and Environment Group


(Reseacher) Natsumi Onish

ASAHI Glass Co, co-proposer


Project Manager
Essential Business Department, Business
Headquarter
(Business Planning Group Leader)
Yoshihisa Horibe

Essential Business Department, Business


Headquarter
(Director)
Yasuyuki Ueda

(3) Research schedule


This FS work has been conducted from October 2014 through February 2015.

72

Chapter3
Justification, Objective and Technical Feasibility of the
Project

(1) Projects Background, Needs and Others


1) Public background and necessity of the project
In Indonesia, while the power demand increases steadily with economic growth, it has fallen into serious power
shortage due to a delay of the development of power supply and the power transmission and distribution network.
According to the power supply business plan of PLN (RUPTL, 2013 2011 Edition), through 2013-2022, power
demand from 189TWh to 386TWh, it is expected to increase at an annual rate of 8.4% of momentum. To meet this
demand for electricity, in the entire country until 2022 but requires additional power generation supply capacity of
59.5GW, these 17.1GW (29%) is in the situation that is not decided prospect of development.
For this reason the Indonesian government has announced a policy to accelerate the development of power
supply and the power transmission and distribution network, including the coal-fired power plant, you're welcome
the introduction of foreign capital in capital investment. In order to strengthen power development, the
government recommends not only the power of PLN, but also IPP, PPS (Private Power Utility) by the private
sector.
On the other hand, Japanese companies, has the technology and know-how of the operation management (O &
M) for the coal-fired power plants, super critical pressure (SC), and superior hardware technology, including the
circulating fluidized bed (CFB). In addition, it is possible to take advantage of Japan's public finance for foreign
investment.
This project, using these technical and financial resources of Japan, and taking advantage of premises of Anyer
factory of Asahimasu Chemical located in West Java Cilegon City (ASC, Inc.), aims to built 600/450 MW scale
coal-fired power plant construction, suppling part of the power to PLN to contribute to Indonesia's power supply
and demand relaxation, contributing to formation of infrastructure projects, and strengthen the international
competitiveness of manufacturing industry.
2) ASCs Business Environment
Asahimas Chemical (ASC) Co., a consolidated subsidiary of ASAHI Glass Co., Ltd., is an Indonesia-based
chlor-alkali manufacturer of the largest class in Southeast Asia and engaged in integrated manufacturing from
caustic soda/chlorine to polyvinyl chloride. Due to the below-described background, how to secure electric
power resources has become a matter of pressing need for the company, which is now forced to confirm and verify,
as soon as possible, specific methodologies and feasibility of power plant projects counted as viable options.
Aside from the option of single-handed in-house power generation, PPS (Private Power Utility), detailed later,
is positioned as a highly viable option among those put under examinations because it enables increased
business efficiency thanks to scale merits and contributes to installation of power infrastructure which can
benefit not only the Indonesian part but also the side of corporate entrants.

a) Electricity tariff increases


In Indonesia, the electricity price has been set low in policy terms. But, given red-ridden management of the
state-run electric utility (Perusahaan Listrik Negara Persoro: PLN), electricity price hikes were decided in January
2014, though the price-increase targets were limited to large industrial customers alone.

76

Based on the decision, from 2014 through 2015, the tariff increases are scheduled as follows;
Power Contract Category 14 (over 30KVA)/some 60 companies: up 65%
Power Contract Category 13 (over 20KVA)/listed companies:

up 39%

For ASC (falling in Category 13), the tariff hikes are worried to produce grave effects on its business
operations.

b) Power balance crisis becoming conspicuous


Because Indonesian efforts to install power infrastructure fail to catch up with its surging electricity demand
(partly attributable to the delays in money-stricken PLNs power plant construction projects), from 2015 on, a
power balance crisis is becoming conspicuous, thus creating an additional worrying condition to the
above-mentioned cost-up problem which should be overcome by some means.
3) ASCs business plans
As a result of the vigorous economic growth across the region, Southeast Asia is expected to mark long-run
expansion of demand for basic chemical products, indispensable goods for infrastructure. Backed by the strong
demand, ASC is planning to bolster its production capacity. By 2015 yearend, with additional capacities
installed, the companys production capacity of caustic soda (already expanded to about 500,000 tons/year in
March 2014) will increase to some 700,000 tons/year, up 40% over the current level, and that of polyvinyl
chloride (PVC) will almost double to about 550,000 tons/year.
Asahimas Chemical Co., currently producing the products cited below, has done a decision-making that its
caustic soda production capacity should be expanded to 700,000 tons/year by the end of 2015.
Caustic soda (NaOH) : Rayon, soaps/detergents, paper/pulp, chemicals
Vinyl chloride monomer (VCM) : PVC feedstock
Polyvinyl chloride resin (PVC) : PVC pipes, films, electric wire coatings
Tab. 3- 1

ASCs Current & Expanded (2015 Yearend) Capacities (1,000t)


Current Capacity

After Expanded

Caustic soda

500

700

VCM

400

800

PVC resin

300

550

Illustrated below is the flow of manufacturing by ASC. It should be noted that production of caustic soda and
chlorine alike are very much electricity-intensive.

77

Fig. 3- 1

ASCs Manufacturing Flow

Because the electrolytic equipment to produce caustic soda and chlorine, the latter being PVC feedstock, is
characterized by heavy weight held by electricity cost, the above-discussed recent condition (rising
electricity-price problem) is now reckoned as a crucial subject that can pose so serious impediments to the
companys business development that it should be solved quickly and effectively.
For these reasons, ASC plans to offer its captive site for the proposed project of coal-fired power construction in
hopes to receive from the power plant, after it is built, less expensive power supply than that from PLN (state-run
electric utility).

78

(2) Upgrading and Rationalization of Energy Use


Coal-fired power plant in Indonesia that is currently running, subcritical pressure power generation system has
become a mainstream.
In this project, by adopting a supercritical pressure power generation system (and CFB power generation
system), sophisticated rationalization of energy use will be achieved.
Pulverized coal fired (PC) fired power systems are widely used as very reliable established techniques.
In pulverized coal-fired thermal power system, supercritical coal-fired power generation system that tried to
power generation efficiency improvement, there are many of introduction track record around the 50/70 ten
thousand kW class in Japan. Power generation end thermal efficiency of this power system is 42.5% (sending end:
40.0%, both HHV basis) improved to, sophistication and streamlining of coal use has become feasible.
In addition, it is also effective in environmental protection. Carbon dioxide and sulfur oxides per amount of
power generation in thermal power plants, with regard to emissions of nitrogen oxides, I can achieve a superior
value.
In Indonesia, coal-fired power plant of supercritical pressure power generation system is still place 3 ( Paiton
(expansion): 815 000 kW, Cirebon: 660 000 kW, Cilacap Baru / Adipala: 66 kW) is the only, has
been scheduled to be the introduction of 600 000 kW-class future.
On the other hand, CFB power generation scheme, has the advantage that you can accommodate a wide range
of coal types, adapted to the Indonesian sub-bituminous coal, can be adapted to many 4,000kcal / kg or less of
low-grade coal moisture.

79

(3) Multi-Angle Examinations Necessary for Deciding Projects


Contents and Others
1) Outline and Particulars of Relevant Regulations/Policies

a) Electric Utility Industry System


In Indonesia, where PLN (former Indonesian National Electric Power Corporation) had been responsible for
power production, transmission and distribution as an integrated operator, a new Independent Power Producer
(IPP) system was introduced in 1992, followed by the employment of PPU (Private Power Utility) under the
newly-enacted Electricity Act of 2009. At present, PLN holds 80%-strong of the countrys installed capacity,
with the remainder complemented by private power producers (IPP, PPU) and in-house power generation.

b) Electricity Act
The Indonesian electric utility industry has been long regulated by the former Electricity Act enacted in 1985.
But, amid the worldwide streams of electricity liberalization, a new Electricity Act was enacted in 2002, but it
was short-lived.
The Electricity Act of 2002, nullified by the Court of Constitution in 2004, could not function virtually, which
subsequently allowed the former Electricity Act to revive.
Later, in 2006, a newly-drafted electricity bill was freshly proposed to the parliament, which was passed in
September 2009 and enacted under the official title of the Law No.30 of 2009 on Electricity (New Electricity
Act), which has been effective to date.
(The New Electricity Act referred to hereinafter chiefly means the Electricity Act of 2009 currently
enforced.)
The particulars to date are summarized below:
IPP participation permitted (1992)
Given the worldwide currents of deregulation since the 1980s, combined with tightening power supply,
Indonesia has also committed to liberalization of public utility businesses. In 1992, with a Presidential Decree
on Private Capital-based Electric Utility Industry (No. 37) issued, participation by IPPs, including foreign capital,
was approved.
Reforms of the electric utility industry initiated (1998)
Later, severely hit by the Asian currency crisis in 1997, the Indonesian rupiah plunged sharply and PLN, traded
with IPPs on the US dollar basis, was squeezed by exchange losses where the supply cost outstripped the selling
price. Under such circumstances, the Indonesian government announced in 1998 its policy to reform the electric
utility sectors structure, and thus initiated revamping of the electric utility industry.

80

New Electricity Act enacted (2002)


With the Law on Electricity (New Electricity Act) enacted in 2002, the move toward splitting/privatization of
the electric utility industry was determined. In specific terms, it was decided to forward introduction of
competitive market, splitting/privatization of the electric utility industry, liberalization of power production
and retailing sectors, control of transmission & distribution systems by PLN, foundation of a power-market
watchdog committee and the transmission & distribution (wheeling) tariff-setting by the committee,
appointments of power system manager and power market manager and so on.
Meanwhile, because Indonesia is an archipelago nation where economic and infrastructure conditions differ
much among different regions, the regions across the country are grouped into either competitive or
non-competitive regions and, in regard to the non-competitive region, it is decided that, as in the past, the priority
is given to the conventional supply system run by the state-owned utility.
Under the New Electricity Act, the principle of competition is introduced into the power production and
marketing sectors in the competitive regions. On competitive regions, it is also decided to set a power-market
supervisory body (BAPEPTAL) as a watchdog over the competitive market.
New Electricity Act nullified by court (2004)
Subsequently in 2004, PLNs labor union, among others, who opposed the introduction of competitive principle
and argued that the New Electricity Act violated the constitution, brought the case to the Court of Constitution.
In December 2004, the Court of Constitution ruled that the New Electricity Act of 2002 infringed the Article 33
of the constitution, which provided that any production sector which is important for the nation and has an
influence on living of a large number of people shall be controlled by the nation, and thus nullified the Act.
Former Electricity Act revived
After the new act was nullified by the court judgment, the former Electricity Act (of 1985) was revived.
However, because the former Electricity Act was an old statute enacted two decade ago, it was found very
inconvenient when promoting power resources development funded by private investment. To make up such
inconvenience, provisional measures have been taken to promulgate a number of ministerial ordinances, which
ruled IPP participation procedures, business permits, etc.
New Electricity Act enacted anew (2009)
Later in 2006, a newly-drafted new electricity bill, which expressly stipulated electricity rate-setting by the
government and the warrant of electricity supply to the people, among other things, was proposed to the
parliament.

In September 2009, the Law No. 30 of 2009 on Electricity (or the newly-drafted New Electricity

Act) was passed and enacted.


The newly-enacted law basically follows the context of the former Electricity Act (1985, Law No. 15) and,
while providing that the nation shall take the responsibility for electricity supply (= the electric utility business
shall be controlled by the nation and undertaken by the government), it also expressly stipulates that in order to
increase the nations ability of electricity supply further, so fa as not harming national interests, other state-owned
enterprises, public-run enterprises, private firms, cooperatives and so on shall be granted maximum possible
opportunities for their undertaking electricity supply services, thus opening the road to private participation in

81

electric utility business.4


Under this newly-enacted law, introduced was the PPU (Public Power Utility) system, detailed later.

c) Legal system of the New Electricity Act


Just like Japans Electric Utility Industry Law, the Indonesian newly-enacted New Electricity Act stipulates
basic matters on the electric utility industry, with more detailed matters ruled by government regulations,
presidential decrees and ministerial ordinances.
The New Electricity Act and its subordinate statutes are chiefly under the jurisdiction of the Ministry of Energy
and Mineral Resources (MEMR in short in English, ESDM in short in the Indonesian language).
Provided below is a list of the New Electricity Act and its subordinate statues, which was prepared based on the
information gained from MEMRs web site.5
In the meantime, these statues all are available in the Indonesian language only.

Tab. 3- 2

New Electricity Act and Subordinate Statutes

Note) Shown in each column are translated Japanese title of the statue, title of the statue (original title in
Indonesian language), translated English title of the statue, URL of the statue (in Indonesian language)
in this order.

Undang Undang Nomor 30 tahun 2009

Tentang Ketenagalistrikan

Law No. 30 of 2009 on Electricity


http://prokum.esdm.go.id/uu/2009/UU%2030%202009.pdf
Peraturan Pemerintah No.14 Tahun 2012
Government Regulation No.14 of 2012

Tentang Kegiatan Usaha Penyediaan Tenaga Listrik

About the Electricity Supply Business Activity

http://prokum.esdm.go.id/pp/2012/PP%2014%202012.pdf
Peraturan Pemerintah No.42 Tahun 2012
Government Regulation 42 of 2012

Tentang Jual Beli Listrik Lintas Negara

About Sale and Purchase of Electricity Cross Country

http://prokum.esdm.go.id/pp/2012/PP%2042%202012.pdf
Peraturan Pemerintah No.62 Tahun 2012
Government Regulation 62 of 2012

Tentang Usaha Jasa Penunjang Tenaga Listrik

About Electric Power Service Business Support

http://prokum.esdm.go.id/pp/2012/PP%2062%202012.pdf
Peraturan Presiden RI No.4 Tahun 2010

Tentang Penugasan Kepada PT Perusahaan Listrik Negara (Persero)

Untuk Melakukan Percepatan Pembangunan Pembangkit Tenaga Listrik Yang Menggunakan Energi
Terbarukan, Batubara Dan Gas
Presidential Regulation No. 4 of 2010

Concerning the Assignment To PT PLN (Persero) To Perform Accelerated

Development of Power Plants Using Renewable Energy, Coal and Gas


http://prokum.esdm.go.id/perpres/2010/Perpres%204%202010.pdf
Peraturan Presiden RI No.71 Tahun 2006

Tentang Penugasan Kepada PT. Perusahaan Listrik Negara

(Persero) Untuk Melakukan Percepatan Pembangunan Pembangkit Tenaga Listrik Yang Mengunakan
Batubara.

4
5

http://energy-indonesia.co m/07basicinfo/0140319inturn.pdf
http://www.esdm.go.id/regulasi.html

82

Peraturan Presiden RI No.59 Tahun 2009

Tentang Perubahan Atas Peraturan Presiden Nomor 71 Tahun 2006

Tentang Penugasan Kepada PT Perusahaan Listrik Negara (Persero) Untuk Melakukan Percepatan
Pembangunan Pembangkit Tenaga Listrik Yang Menggunakan Batubara
Peraturan Presiden RI No.47 Tahun 2011

Tentang Perubahan Kedua Atas Peraturan Presiden Nomor 71

Tahun 2006 Tentang Penugasan Kepada PT Perusahaan Listrik Negara (Persero) Untuk Melakukan
Percepatan Pembangunan Pembangkit Listrik Yang Menggunkan Batubara
(In English)
Presidential Regulation No. 71 of 2006 on Assignment to PT. State Electricity Company (Persero) Acceleration To
Perform The Development of Power Plant Using Coal.
Presidential Regulation No. 59 Year 2009 on Amendment to Presidential Regulation No. 71 Year 2006 on Assignment
to PT State Electricity Company (Persero) To Perform Accelerated Development of Power Plant That Uses Coal
Presidential Regulation 47 of 2011 on the Second Amendment to Presidential Regulation No. 71 Year 2006 on
Assignment To PT PLN (Persero) To Perform Accelerated Development of Coal Power Plants that use
URL

http://prokum.esdm.go.id/perpres/2006/perpres_71_2006.pdf

http://prokum.esdm.go.id/perpres/2009/Perpres%2059%20tahun%202009.pdf

http://prokum.esdm.go.id/perpres/2011/Perpres%2047%202011.pdf

Keputusan Menteri ESDM No. 1122 K/30/MEM/2002

Tentang Pedoman Pengusahaan Pembangkit Tenaga

Listrik Skala Kecil Tersebar


Decision of the Minister of Energy and Mineral Resources No. 1122 K / 30 / MEM / 2002 about Guidelines Exploitation
Small Scale Power Plant Spread
http://prokum.esdm.go.id/kepmen/2002/kepmen-1122-2002.pdf
Peraturan Menteri ESDM No.01 Tahun 2012

Tentang Perubahan Atas Peraturan Menteri ESDM Nomor 15

Tahun 2010 Tentang Daftar Proyek-Proyek Percepatan Pembangunan Pembangkit Tenaga Listrik Yang
Menggunakan Energi terbarukan, Batubara, Dan Gas Serta Transmisi Terkait
Minister of Energy and Mineral Resources Regulation No.01 of 2012

Changes in the Regulation of the Minister of

Energy and Mineral Resources No. 15 of 2010 on List of Projects to Accelerate Development of Power Plant That Uses
Renewable Energy, Coal, and Gas Transmission And Related
http://prokum.esdm.go.id/permen/2012/Permen%20ESDM%2001%202012.pdf
Peraturan Menteri ESDM No.04 Tahun 2012

Tentang Harga Pembelian Tenaga Listrik Oleh PT PLN (Persero)

Dari Pembangkit Tenaga Listrik Yang Menggunakan Energi Terbarukan Skala Kecil Dan Menengah Atau
Kelebihan Tenaga Listrik
Minister of Energy and Mineral Resources Regulation No.04 of 2012 about the Power Purchase Price by PT PLN
(Persero) From Power Plants Using Renewable Energy Small and Medium Scale Or Excess Power
http://prokum.esdm.go.id/permen/2012/Permen%20ESDM%2004%202012.pdf
Peraturan Menteri ESDM No.22 Tahun 2012

Tentang Penugasan Kepada PT Perusahaan Listrik Negara

(Persero) Untuk Melakukan Pembelian Tenaga Listrik Dari Pembangkit Listrik Tenaga Panas bumi Dan harga
Patokan Pembelian Listrik Oleh PT Perusahaan Listrik Negara (Persero) Dari Pembangkit Listrik Tenaga Panas
Bumi

83

Minister of Energy and Mineral Resources Regulation 22 of 2012 on Assignment to PT State Electricity Company
(Persero) To Perform Purchase of Electricity from Geothermal Power Plants And Electricity By reference price Purchase
PT PLN (Persero) From Geothermal Power Plant
http://prokum.esdm.go.id/permen/2012/Permen%20ESDM%2022%202012.pdf
Peraturan Menteri ESDM No.28 Tahun 2012

Tentang Tata Cara Permohonan Wilayah Usaha Penyediaan

Tenaga Listrik Untuk Kepentingan Umum


Regulation of the Minister of Energy and Mineral Resources 28 In 2012

Areas of Application Procedures Electrical

Power Supply Business for Public Interest


http://prokum.esdm.go.id/permen/2012/Permen%20ESDM%2028%202012.pdf
Peraturan Menteri ESDM No.04 Tahun 2007

Perubahaan Atas Peraturan Menteri Energi Dan Sumber Daya

Mineral Nomor 01 Tahun 2006 Tentang Prosedur Pembelian Tenaga Listrik Dan Atau Sewa Menyewa Jaringan
Dalam Usaha Penyediaan Tenaga Listrik Untuk Kepentingan Umum
Peraturan Menteri ESDM No. 01 Tahun 2006

Tentang Pembelian Tenaga Listrik dan / atau Sewa Menyewa

Jaringan Dalam Usaha Penyediaan Tenaga Listrik untuk Kepentingan Umum


(In English)
Minister of Energy and Mineral Resources Regulation No.04 Year 2007

Amendment to the Regulation of the

Minister of Energy and Mineral Resources No. 01 Year 2006 on Procedures Power Purchase Or Lease And
Networking In Business Electricity Supply For the Public Interest
Minister of Energy and Mineral Resources Regulation No. 01 In 2006

About the Power Purchase and / or Lease

Network In Power Supply Business in the Public Interest

http://prokum.esdm.go.id/permen/2007/permen-esdm-04-2007.pdf

http://prokum.esdm.go.id/permen/2006/permen-esdm-01-2006.pdf

Peraturan Menteri ESDM No. 02 Tahun 2006

Tentang Pengusahaan Pembangkit Listrik Tenaga Energi

Terbarukan Skala Menengah


Minister of Energy and Mineral Resources Regulation No. 02 In 2006

Exploitation of Renewable Energy Power Plant

Scale Medium
http://prokum.esdm.go.id/permen/2006/permen-esdm-02-2006.pdf
Peraturan Menteri ESDM No. 0010 Tahun 2005

Tentang Tata Cara Perizinan Usaha Ketenagalistrikan Untuk

Lintas Provinsi Atau Yang Terhubung Dengan Jaringan Transmisi Nasional


Minister of Energy and Mineral Resources Regulation No. 0010 Year 2005

About the Business Licensing Procedures

For Traffic Electricity Province Or Connected With National Transmission Network


http://prokum.esdm.go.id/permen/2005/permen-esdm-10-2005.pdf
Undang Undang Nomor 2 Tahun 2012 Tentang Pengadaan Tanah Bagi Pembangunan Untuk Kepentingan Umum
Law No. 2 of 2012 on Land Procurement for Development for Public Interest
http://bpjt.pu.go.id/uploads/files/21/f33f138186b999064209a15eff14065f.pdf

84

2) Details of relevant regulations/policies


Focusing on the electric-utility regulations which are likely to influence the project examined under this FS
works, their details are stated in this section.

a) Outline of the regulations


At present, electric power-related businesses in Indonesia are regulated by the Law No. 30 of 2009 on
Electricity (referred to as the New Electricity Act in this report) and relevant ordinances (government
regulations, presidential decrees, the Energy & Mineral Resources Ministrys ordinances (hereinafter referred
to simply as the ministerial ordinances), etc.).
Electricity supply services in Indonesia, under the Article 9 of the New Electricity Act, are roughly grouped
into two categories below:
Electricity supply services for public use (Article 9-a): PLN (State-run enterprise), IPP (Independent
Power Producer), (non-PLN) PPUPublic Power Utility
(Note: PLN can be counted as a kind of PPU.)

Electricity supply services for in-house use (Article 9-b): In-house power generation

In the part below, based on statute/literature studies as well as first-hand information gained by interview
surveys made to the MEMR and PLN, the regulations applicable to IPP and PPU (other than PLN) are
outlined.

b) Regulations applicable to IPP


Positioning under the New Electricity Act
Falling under electricity supply services for public use stipulated in Article 9-a of the Act.
Business license
Pursuant to Article 19(2) of the Act, IPP is required to obtain an electric utility business license
(IUPTLIjin Usaha Penunjang Tenaga Listrik).
Power selling to PLN
Whole output to be sold to PLN, which is an essential condition.
Long-term contract, like a 25-year agreement, is taken for granted.
The right of preferential negotiation on long-term power purchase agreement (PPA) with PLN is
obtained based on biddings offered by PLN.
Details are ruled by the Government Regulation No. 14 (2012), the Ministerial Ordinance No.1 (2006)
and its amended-version, that is, the Ministerial Ordinance No.4 (2007), as well as the Ministerial
Ordinance No.5 (2009).
Power marketing to consumers (retailing)
Given the essential requirement for selling the whole output to PLN, retailing to consumers is not
possible as a matter of course.
During the former Electricity Act days, in such industrial complexes as Cikarang, IPP was allowed
direct supply (specified supply service) to consumers in some cases, which are totally ruled out today.

85

c) Regulations applicable to PPU


Positioning under the New Electricity Act
Falling under electricity supply services for public use stipulated in Article 9-a of the Act.
Business license
Pursuant to Article 19(2) of the Act, PPU is required to obtain an electric utility business license
(IUPTLIjin Usaha Penunjang Tenaga Listrik).
Power selling to PLN
Power can be sold to PLN on condition that PLN is in need of the power being offered.
Two ways are available; one is to sell part of output to PLN, and the other to sell the whole output to
PLN once, then buy back some from PLN.
The power selling price is set basically with B-to-B negotiations with PLN. Meanwhile, in the
buy-back case, the selling price is determined with B-to-B negotiations with PLN by taking the cost
build-up menthod as the basis.
The Energy & Mineral Resources Ministry is now drafting relevant ministerial ordinances in preparation
for their enactment.

It is unknown which of a-single-year or a long-term is specified in the

currently-drafted ministerial ordinances as a standard contract term.


Power marketing to consumers (retailing)
Under Article 10 of the Act, PPU which obtains WU (detailed later) can undertake integrated services of
power production, transmission, distribution and retailing, and also offer distribution and (or) retailing
services.
Retail price is set by B-to-B negotiations first, then needs to gain the local government approval.
The benchmark power purchase price in the buy-back case from PLN is set at 1,191Rp./kWh, which can
be lowered by negotiations.
Obtaining a WU
PPU which hopes to offer distribution/retailing services to consumers is required under Article 10
(3)~(5) to obtain WU (Wilayah Usaha: business area) where the PPU is allowed to offer its
distribution/retailing services (ex. plant site).
To obtain WU requires PLNs agreement and MEMRs permit.
If well-negotiated unofficially beforehand, WU can be obtained in two months at the shortest.
Details of WU are ruled under the Ministerial Ordinance No. 28 (2012).

Tab. 3- 3
Utility
type
IPP

Indonesias Legal System on Power Supply Services


Allowed/

Action

needed/

Legal system

Explanations

or not
Sell (to PLN)

Retail (to consumers)

Allowed

Not

Falling under Art. 9-a (for public use)

Bidding system

Details ruled by MEMR ordinances

Long-term contract

Nos. 14 (2012), 4 as amended (2007)

Whole output to be sold to PLN as

and 5 (2009).

an essential requirement.

Selling whole output to PLN is an

To such industrial complexes as

86

Allowed/

Utility

Action

type

needed/

Legal system

Explanations

essential requirement, which rules out

specified district supply was

retailing to consumers.

allowed in the past, which is not

or not
allowed

allowed today.
Backup

None in specific terms (perhaps)

With whole output sold to PLN,


no need for PLNs backup except
the case in-house needs must be
covered.

WU acquisition

Not

Not required pursuant to Art.10

needed

No need for WU acquisition


because only power production
(with whole output sold to PLN) is
allowed and no distribution &
retailing

services

offered

to

consumers.
IUPTL acquisition

Needed

Permit for electric utility services


(IUPTL) required under Art.19(2).

PPU

Sell (to PLN)

Allowed

Ordinance under preparation by

B-to-B contract (no precedent)

MEMR.

In buy-back case after selling


whole output once, the selling
price

is

set

calculation

based

on

and

cost
B-to-B

negotiations.
On contract term under MERM
ordinance, which of a single-year
or a long-term is specified remains
unclear.
PLNs agreement is a necessary
condition.
Retail (to consumers)

Allowed

Falling under Art. 9-a (for public use)

Price, to be settled by B-to-B

Art.10 allows (integrated services of)

negotiations, also requires local

production, transmission, distribution

governments approval.

and retailing as well as distribution

For buy-back case after selling

and/or retailing conditional on WU

whole

acquisition.

benchmark price is set at 1,191

output

to

PLN

once,

Rp/kWh, which can be lowered by


negotiations.
Backup

Allowed

PLNs general electricity tariffs are

87

Choose either firm or non-firm

Allowed/

Utility

Action

type

needed/

Legal system

Explanations

or not
regulated by MERM ordinance No. 31
(2014).

interconnection.

But, backup fee can be set

pursuant to PLNs rules.


WU acquisition

Needed

Required under Art. 10 (3) ~ (5).

Both PLNs agreement and

Details ruled under MERM ordinance

MEMR permit are required.

No. 28 (2012).

If well-negotiated unofficially
beforehand, the above can be
gained in two months at the
shortest.

IUPTL acquisition

Needed

Permit for electric utility services


(IUPTL) required under Art.19(2).
Allowed pursuant to Art. 23 (3).

Benchmark price set at 656

power

Details ruled under MERM ordinance

Rp/kWh (Higher price requires

producers

No. 4 (2012).

MEMRs approval).

In-house

Sell (to PLN)

Allowed

A-single-year contract
In-house use

Allowed

Allowed pursuant to Art. 23.


Permit for operation (Izin Operasi) by
Cilegon City is required under Art. 19
(2).

Backup

Allowed

PLNs general electricity tariffs are

Choose either firm or non-firm

regulated by MERM ordinance No. 31

interconnection.

(2014).

But, backup fee can be set

pursuant to PLNs rules


WU acquisition

Not

needed
IUPTL acquisition

Not
needed

1 When interconnecting power resources to PLNs grid, at least a month is necessary for KKO (grid impact
study).
2 WU (Wilayah Usaha): business area
3 IUPTL(Ijin Usaha Penunjang Tenaga Listrik) a permit for electric utility services required under the New
Electricity Act
4 IPP: Independent Power Producer
5

PPU: Private Power Utility

6 MEMR is currently examining a power wheeling mechanism which is applied to IPP, PPU and in-house power
producers when they offer power wheeling/retail wheeling to consumers by using (lending) PLNs grids.

88

3) Views held by relevant offices


In order to learn electric-utility regulations which can influence the development of the proposed project in the
days ahead, interview surveys were made to competent offices in Indonesia. The information furnished by them
is summarized below.

a) Summary
Major contents of electric-utility regulations which are unveiled during our interview surveys to Indonesias
competent offices are summarized in the table below.

Tab. 3- 4
Type

Major Contents of Electric Utility Regulations by Producer Type (Summary)

Operator

WU

Single-

Supply to consumers

Remarks

Not allowed.

Should be sold 100%

Handed

IPP

Power sale to PLN

to PLN.
Not required

SPC

Bidding
Long-term contract

SingleHanded

PPU

Can be sold by B-to-B

Supply to the area

trade (but PLN hopes

covered by acquired

to purchase whole

WU is allowed (supply

output, if possible).

to consumers in any

MEMRs ordinance

other areas not

under preparation.

allowed).

Required
SPC

With generating
Surplus output can be
In-house

Counted as

power

identical to

producers

consumers

Supply within the plant

capacity leased by

site is allowed. Supply

SPC and the like, the

Fixed price

to the outside not

consumer can operate

Annual contract

allowed.

the capacity as its

sold.
Not required

operator.

b) The Ministry of Energy and Mineral Resources (MEMR): General Bureau of Electricity
The interview was made, basically in reference to the two cases cited below, in hopes to learn chiefly their
possibilities from the legal regulatory aspect.
Inverse-current-to-PLN available case (with surplus output available at IPP, PPU & in-house power
producers)
Inverse-current-to-PLN unavailable case (with surplus output unavailable at IPP, PPU & in-house power
producers)
In-house power producers (falling under Article 9-b of the New Electricity Act) are required to obtain the
specified permit under the New Electricity Act.

In this case, the competent office directly involved in

permitting the proposed project is the City of Cilegon.


In-house power generation, compared with other private power resources (PPU, IPP), involves easier
89

permit-gaining procedures in relative terms.


In case the power resource is owned by a SPC (in-house power producer) and power output is sold from the SPC
to a consumer (plant), the case is taken as involving power trading, whereby the SPC is reckoned as not an
in-house producer but a PPU (Private Power Utility) subject to more complicated procedures.
PPU is a kind of those defined in Article 9-b of the New Electricity Act (power supply services for public use)
and is a private entrant into the sector of power supply services for public use, where PLN has been in service.
When a third party, typically SPC, offers in the capacity of PPU distribution and retailing services to consumers
(ASC), it is required under Article 10 (3)~(5) of the New Electricity Act to obtain a WU (Wilayah (area), Usaha
(business) = Business Area). To gain a WU first requires PLNs agreement and the governments approval,
which involves painstaking procedures. So far, there have been about 20 cases of WU acquisition.
Detailed rules on WU acquisition are provided under the MEMRs Ministerial Ordinance No. 28 (2012).
When SPC leases its captive power production capacity and the like to a consumer (Anyer Plant) and the latter
commits to power generation there, the case is taken as not involving power trading. Accordingly, without
power trading, this case deems to cause no problems in electricity regulatory/institutional terms and thus the
case can be counted as fully viable.
IPP is approved nothing but to sell the whole output to PLN. In the past, direct retailing from IPP to such
consumers as industrial complexes has been approved in some cases, which are ruled out today.
When part of output is sold from a power resource to PLN, the case is not allowed for any IPP for the
aforementioned reason. As for PPU, the case is allowed conditional on WU acquisition. In case of surplus
output sold from SPC to PLN, it is allowed under the provision of Article 23 (3) of the New Electricity Act.
Detailed rules on SPCs surplus output purchasing are provided under the MEMRs Ministerial Ordinance No. 4
(2012), and the benchmark purchase price is set at 656 Rp./kWh. Any price over the benchmark needs an
approval of the government (MEMR).

c) PLN: Officer in charge of Power System Planning


Power plant construction generally takes 48 months from the start (of which definition remains unknown) to
commissioning.
In the SPC case (where power producer is identical to consumer) and the PPU case (where power producer and
consumer are different entities) alike, PLNs backups are available for emergency cases (during periodical
inspections, accidental outage). But, it costs high (firm fixed costs + extra costs incurring in the backup
service).
The backup fee is settled, within the range pursuant to the governments tariff regulations, by negotiations
between PLN and the backup beneficiary in principle.
In case surplus output is sold to PLN, the case is allowed under the New Electricity Act if the seller is in-house
power producer, whereby the benchmark price (7~8 cents/kWh) is set under the MEMRs Ministerial
Ordinance No. 4. Any price over the benchmark needs an approval of the MEMR.
Surplus output can be sold from PPU to PLN, with the tariff settled by B-to-B negotiations. However, so far
there has been no case where surplus output was sold from PPU to PLN.
Output can be sold from PPU to a consumer (plant) conditional on WU acquisition. The selling price, first
settled by B-to-B negotiations, needs an approval of local government (though specific competent office

90

remains unconfirmed).
PLN welcomes IPP. As for in-house power producers and PPU, PLN is taking a please-do-it (as-you-like)
stance.
When the owner of power resource is a third party, typically SPC, WU acquisition is necessary if its power
output is sold directly to a consumer (plant). On the other hand, when the owner of power resource is a third
party, notably SPC, and power is produced there by leasing the generation capacity to the consumer (plant),
the case is treated in the same manner as ordinary in-house power generation. That is, leasing system is fully
viable.
WU acquisition, extremely hard in the past, is becoming easier today.

In principle it can be gained only if the

MEWR and PLN agree.


However, so far WU acquisitions within the PLN service areas numbered a mere 3 cases, all involving industrial
complexes.
(Note: To the same question made to the MEMR yesterday, the MEMR official answered 20 cases.

It is reckoned that the 20

cases included WU acquisitions in not-yet-electrified areas (outside PLN service areas) and WU acquisitions by PLNs
subsidiaries.)

Meanwhile, direct supply from IPP to a consumer (so-called specified district supply in Japan), allowed as
special cases in the past, is totally ruled out today.
Power wheeling now under consideration by the MEMR (so-called PPS in Japan = retail wheeling, and power
wheeling) seems hard to be realized in the short run because PLNs grids have little room for that due to limited
reserve capacity.
Definitions of IPP, which should be detailed by some literature, chiefly include its output sold 100%
long-term power purchase agreement, and PLN-led biddings.
PLNs long-term supply service plan puts that, particularly in the years to 2017, power-resources supply is
expected to remain in an extremely tight condition.

d) PLNMarketing Division

Project model involving PPU and WU

Power output sold from PPU to ASC is allowed conditional on WU acquisition. But, from the PLN perspective
(or as a view held by the officer in charge), the systems described below are preferable to PPU-to-ASC direct
retailing.
(It should be noted the above-mentioned view is nothing but a privately-conceived view of the officer in charge.
Ultimately, it seems that the matter is settled by further negotiations with PLN.)
A. The whole output to be sold once from PPU (SPC) to PLN.
The selling price is based on the cost method (A+B+C+D) and settled by B-to-B negotiations between the
parties.
Acapacity investment cost, BO&M fixed cost, Cfuel cost, DO&M variable cost
By the way, the benchmark price applicable to surplus output sold by an in-house power producer to PLN,
set at 656 Rp/kWh, is equivalent to B+C+D mentioned above. (Any price outstripping the benchmark
needs a MEMRs approval.)

91

Note by E&T: The power selling price from PPU (SPC) to PLN, which is calculated by adding the
above-mentioned A to the benchmark, seems to become higher than 656Rp/kWh by the same margin as
the amount of A.
AS for the case where output is sold from PPU to PLN, the MEMR is now preparing for mapping out
relevant regulations (perhaps in the form of MEMR ordinance). It appears Mr. Eric of the MEMR is
familiar with specifics of the preparatory works. As for the standard term of power purchase agreement,
a single-year basis is likely but the possibility of a longer term cannot be ruled out.
As a condition to enable power purchase agreement from PPU (SPC) to PLN, it is necessary that PLN is in
need of the output.
B. Power output sold from PLN to ASC
The benchmark tariff is 1,191 Rp/kWh (identical to the selling price to ordinary consumers).
The benchmark price above can be lowered by B-to-B negotiations.
It is fully possible for SPC to lease its generating capacity and the like to ASC and ASC, in the capacity of an
in-house power producer, operates the generating capacity to produce power for its own use. From the context
of the Electricity Act, this case is given the same treatments as those applied to in-house producers. Surplus
output, if any, can also be sold to PLN (for 656 Rp/kWh as the benchmark; a MEMR approval required when
outstripping the benchmark).
WU, which is required for PPU, can be obtained in two months if well-negotiated unofficially beforehand with
the competent offices, such as the MEMW, PLN and local government (ex. Cilegon City Government).
Without a prior negotiation, WU acquisition can become more time-consuming.

Backup services

A. Firm interconnection case:


As an interconnection tariff (parallel fee) at least charged is a minimum charge equivalent to
40-hour-per-month in service.
In case power-receiving capacity is 300MW, the minimum charge will be as follows:
(300MW/0.85 (power factor) (40 hrs./month) 1,191Rp/kWh
1,680 mil. Rp/month

160 mil. /month

1,960 mil. /month

In case power-receiving capacity is 150MW, the minimum charge turns to be 980 mil. /month.
Though not confirmed during the interview, when more power is received than covered by the minimum
charge (firm), it is thought that the extra portion over the minimum charge is charged with a meter-rate
system, that is, the extra power received (kWh) x 1,191 Rp/kWh.
The meter-rate-based specific tariff during backups (and any case outpacing the aforementioned amount as
well) is calculated in the same manner as explained above, including the unit cost.
B. Non-firm interconnection (interconnected-only-in-emergency case:
In this case, the so-called temporary service cost is charged for the backups offered. However, those
who want a temporary service must notify PLN a month beforehand.
Accordingly, this case, though helpful in preset periodical inspections, is useless in dealing with such
unforeseeable events as abrupt mechanical troubles.

92

The minimum charge applied to this case, which is equivalent to a-million-kWh in service with the unit
tariff set at 1,650 Rp/kWh, is calculated with the formula below:
1,650 Rp/kWh 0.8 (coefficient) 1 mil. kWh/time
1,320 mil. Rp/time

12.83 mil. /time

The above is the minimum. When more power than a million kWh is received during backups, a
meter-rate-based specific tariff is charged as follows:
Calculated below is an annual backup charge which is figured out on the assumption that a unit out of
300MW-generators (150MW x 2 units) would be put to a periodical inspection every 6 months, that is,
with a down time per unit amounting to 10 days/year 24 hours/day240 hours/year, backups required
for the two units would amount to 480 hours/year 150MW in total.
1,650 Rp/kWh 0.8(coefficient) 480 hours/year 150MW
95,000 mil. Rp/year

920 mil. /year

Compared with the annual minimum charge (980 mil. /year) calculated for the aforementioned Case A
(firm interconnection) where the power received amounted to 150 MW, the annual charge for this
temporary service (920 mil. /year) in Case B (non-firm interconnection) is found less expensive by about
60 million /year.
Others
Before having a new power resource interconnected with PLNs grid, it is required to undergo PLNs
assessment called KKO (an abbreviated Indonesian language which means an assessment to learn if or not
operable enough. Virtually it means a grid impact assessment).
When making a KKO, PLN employs a system simulator named Dispatcher (which probably is a software)
based on which a grid impact assessment is made. To complete a KKO requires a month at least.
When a third party, like SPC, offers distribution and retailing services to consumers in the capacity of PPU,
the both of IUPTL (standing for Ijin Usaha Penunjang Tenaga Listrik, or a permit for electric utility services
for public use required under the new Electricity Actand WU (business area).
e) Cilegon City: Mining Energy Division, Cooperative Bureau for Commerce & Industry
It appears fully possible for PPU (with WU and IUPTL as required) to offer supply services to the only one
consumer (on top of PLN) as its output taker.
From the Cilegon Citys perspective, PPU which contributes to PLNs grids in the form of inverse current is
much more preferable. Yet, regardless of PPU or in-house power producers, the City welcomes introduction
of generating capacities.
As for WU required for PPU, Cilegon City is ready to issue a recommendation in 3~4 days if all the documents
required are well prepared. The documents include a FS report on the PPUs power plant and a map (which
shows its location). These documents (FS report and map) are also required when applying for IO (Izin
Operasi: operation permit) of an in-house power producer (and PPUs IUPTL as well).

93

Fig. 3- 2 An Example of FS Report Required When Applying for WU, IUPTL & IO Permits/Recommendation

Note) FS Report on Indrama Petrochemicals in-house power plant (40MW) located in Cilegon City

The flow of WU acquisition is as follows:

A recommendation to be gained from Cilegon City (one of necessary conditions for WU acquisition)

The application forms and Cilegon Citys recommendation to be filed to the MEMRs General Bureau of
Electricity.

PLNs agreement to be gained.

Note) PLNs agreement is thought to be a crucial requirement.


essential.

In order to gain PLNs agreement, unofficial prior negotiations are

Meanwhile, as asserted by the PLN officer in charge of system planning, WU acquisition, which has been very

hard in the past, is becoming easier today.

The retailing tariff from PPU (SPC) to consumers is settled in the flow described below (with neither
governments nor PLNs involvement at this stage).
Negotiations between SPC (PPU) and consumers
Consultation between SPC (PPU) and Cilegon CityAgreementOK
Cilegon City does not care at all even if this PPUs retailing tariff for its consumers is set much lower than
PLNs prevailing retail tariff for general consumers.

94

4) Demand Outlook
a) Indonesias electricity supply-demand outlook
As illustrated below, Indonesias electricity demand is likely to surge sharply from 189 TWh in 2013 to 386
TWh in 2002, up 8.4% a year on average.
Fig. 3- 3 Indonesias Electricity Demand Outlook (GWh)

SourecePLNElectricity Supply Business Plan 2013 - 2022Executive Summary


As discussed in Chapter 1, to meet such ballooning electricity demand requires a total of 59.5 GW (59.5 million
kW) additional installed capacity to be constructed between 2013 through 2022, which means capacity
construction of about 6 GW (6 million kW)/year on average.
According to PLNs electricity supply service plan 2013-2022, of a total of 59.5 GW aforementioned, a total of
16.9 GW (16.9 million kW) is projected to be installed by PLN. However, the remainder, or a total of 17.1 GW
(17.1 million kW), is not yet secured.
Such being the situation, the Indonesian government (Ministry of Energy and Mineral Resources) and PLN
alike are longing for construction of new/additional generating capacities by private power utilities (IPP and PPU)
as well as in-house power producers and expecting much for such capacity investments by foreign countries,
including Japan.
b) ASCs electricity demand outlook

Peak load outlook

ASCs maximum power load currently stays at around 185,000 kW, which is projected to increase to 275,000
kW after caustic-soda and other manufacturing capacities are expanded.
Electricity consumption outlook
ASCs electricity consumption currently amounts to 185MW8,200h/y1,517 GWh/year and is likely to jump
to 275MW8,200h/y2,255GWh/year after the manufacturing capacity expansion.
95

3) Procurement of fuel
In the following, I examine the coal mine where it can supply it to in a target project.

a) General Descriptions of Indonesian Mines


It is already mentioned that CCoW and IUP mines are in operation in Indonesia. Table 9 shows coal output
from CCoW mines, comprised of three generations, and from state-run mines. As noted from Tab.3-, output by
state-run PTBA and CCoW mines, when combined, reached 70% of the whole. That is, the combined output of a
mere 50 mines outstrips total production from a few thousands IPU mines.

96

Tab.3-5 Output Trends by CCoW & State-run (PTBA) Mines

PTBA
Adaro Indonesia, PT
Allied Indo Coal, PT
Arutmin Indonesia, PT
Berau Coal, PT
Indominco Mandiri, PT
Kartim Prima Coal, PT
Kideco Jaya Agung, PT
Multi Harapan Utama, PT
Tanito Harum, PT

First generation
1
Antang Gunung Meratus,PT
Bahari Cakrawala Sebuku, PT
Borneo Indobara, PT
Jorong Barutama Greston, PT
Kartika Selabumi Mining, PT
Mandiri Intiperkasa, PT
Marunda Graha Mineral, PT
Riau Bara Harum, PT
Trubaindo Coal Mining, PT

Second
generation
2
Asmin Coalomdo Tuhup
Bangun Banua Persada Kalimantan, PT
Baramarta, PD
Bara Sentosa Lestari
Batu Alam Selaras PT
Baturona Admulya
Baramulti Suksessarana, PT
Dhama Puspita Mining
Firman Ketaun Perkasa. PT
Guning Bayan Prartama Coal PT
Insani Bara Perkasa, PT
Intitirta Perima Sakti, PT
Indexim Coalindo
Interex Sacra Raya, PT
Kadya Caraka Mulia, PT
Kalimantan Energi Lestari. PT
Lianggan Cemerlang, PT
Lana Harita Indonesia, PT
Mahakam Sumber Jaya, PT
Multi Tambang Jaya Utama. PT
Nusantara Temal coal, PT
Perkasa Inakerta, PT
Pesona Khatulistiwa Nusantara PT
Pendopo Energi Batubara PT
Sumber Kurnia Buana, PT
Santan Batubara PT
Senamas Energindo Mulia PT
Singulurus Pratama Coal PT
Tanjung Alam Jaya, PT
Teguh Sinar Abadi, PT
Wahana Baratama Mining, PT

Third generation
3
Constructer

Total

KPIUPother
KPIUP
IUP

Total

IUP

6
(1,000 ton)

2005
8,606

2006
9,292

2007
8,555

2008
10,099

2009
10,830

2010
11,919

2011
2012
12,389
13,728

26,686
169
16,757
9,197
5,752
32,000
18,217
2,060
2,100

34,368
51
16,234
10,533
10,302
35,301
18,900
1,074
2,710

36,037
85
15,394
11,811
11,455
38,754
20,541
1,080
2,690

38,482
72
15,735
13,052
10,797
36,288
21,900
1,872
2,557

40,590
0
19,298
14,336
12,396
38,154
24,692
1,528
3,239

42,199

47,667

46,779

20,426
17,383
14,252
39,951
29,049
1,832
3,513

22,832
19,444
14,765
40,452
31,395
1,311
2,469

27,379
20,999
12,031
39,217
34,649
1,174
3,284

112,938

129,473

137,847

140,755

154,233

168,605

180,335

185,512

1,029
3,000
3,475
1,200
1,082
829
570
5,000

75
3,495
496
3,092
1,110
1,165
1,367
917
4,284

310
3,382
871
2,676
601
1,854
1,452
726
3,555

378
3,531
1,219
2,419
207
1,995
1,446
466
4,544

548
1,982
1,182
3,132
2,451
932
1,265
5,183

745
1,104
1,118
903
263
2,979
1,341
2,218
5,545

1,404
1,509
2,754
1,426
287
3,074
963
1,551
7,021

3,201
636
3,650
1,280
42
2,424
670
716
7,539

16,185

16,001

15,427

16,205

16,675

16,216

19,989

20,158

1,286

138
2,256

276
3,723

346
4,335

216
254
3,252

1,740
605
2,527

2,521
911
3,689

54
280

2,857
942
4,433
4
39
525

311
4,142
1,007

494
4,053
2,249

1,265
3,458
4,222

2,496
3,776
4,421

27
675

0
0
23
3,459
772
0

442

139

4,300
350

5,156
88

4,532
178

167
600

196
434
127

158
335
66

112
239
13

93
121

85
46

5,752
2,304

1,685
2,926

1,480
2,936

208

930
523

1,302
3,058
90
2,264
1,144

1,977
5,303
641
1,446
2,685
712

1,298

1,341

1,526

1,018

1,587

1,466

1,465

1,654
209
772

1,397
4,537
357
920
2,012
56
440
1,305
1,249
18
478
1,028
1,021
2,887

18,346

16,463

18,267

20,810

27,101

147,469

161,937

171,541

177,770

9,518

25,310

36,834

165,593

196,539

216,930

1,021

122
228

255

2,239
7,983
449
1,118
3,129
1,300
6
908
1,725

2,861
9,250

1,748
811
1,290
4,234

1,706
785
927
3,627

33,377

44,913

45,436

198,009

218,198

245,237

251,106

52,363

45,615

45,052

95,645

121,065

240,232

254,454

275,169

353,271

385,899

720
1,992
49
1,095
958
1,092
2,574

718
2,226
1,217
5
502
2,400

Source: Mineral Resources Directorate General issued mineral resources statistics

Total output, put at 380 million tons in Tab.3- based on as old statistics as a year earlier, exceeded 420 million tons in FY2013 and
is projected to increase further in FY2014. According to Reuters prompt report, Indonesias coal output in the first half of FY2014
is projected at 213 million tons/6 months, up 6.8% over a year ago.

97

b) Selection of Mines as Potential Suppliers


When building a power plant, it is first determined using which coal with what calorific value is advantageous
in a given construction site and, then, matching efforts are made between coal specifications and
generating-capacity size.

So two cases below are considered here in consideration of stable supply possibility in

the mid-and-long term:


Case 1: When coals with a calorific value of 5,000 kcal/kg is in use as generally used at PLN power plants
Case 2: : When coals with a calorific value of 4,200 kcal/kg becoming mainstream is in use
Case 1
In Indonesia electricity has been generated for years by using coals of 5,000 kcal/kg in calorific value.
Accordingly, thanks to all relevant facilities of which performance and durability has been proved,
facilities-related troubles should hardly occur. Also, coals of this rank can easily be secured at this stage today.

In case coal specs have already been specified, it might be possible to unroll the next works of originally
selecting coal brands. But, this time, it is decided to research on-going situations of a nearby power plant
running on 5,000 kcal/kg-coals, with resultant information of coals in use stated in this report.

It is because of a judgment that research results can not only show the most stable way of securing coals but
also identify the cheapest coal brands for the planned power plant if built with similar specs.

Information about Sulalaya Power Plant


Fig.3-4

General Descriptions of Sulalaya Power Plantphoto

Source: Indonesian Power


PLN has a subsidiary named Indonesian Power Co. This company possesses and runs a power plant in a
coast area northwest of Java. Stated below are the information gained from the companys Sulalaya power
plant.

Tab.3-6 General Descriptions of Sulalaya Power Plant


Specs

Calorific value of coal use GAR

Unit volume 7

14Unit400MW 5Unit600MW

5,000kcal/kg

Unit volume 1

8Unit600MW

4,200kcal/kg

Source: Indonesian Power

98

Boiler model: Semi-critical-pressure natural-circulation boilers (Nos. 1~7: Canada, No. 8: China).

Environmental equipment: Electric dust collectors alone (without de-sulfurization, de-nitrification). Heat
reuse of 150-flue gas currently under consideration

PLN consumes 16 million tons/year (procured) of coals, out of which 11 million tons/year procured by
Indonesian Power. As its manner of procurement, the company is committing to open tender. The
successful tender price last time was CIF US$6566/t.

Indonesian Powers coal procurement contracts consist of long-term (10 years) and mid-term (3 years)
ones, with the prices settled anew every year. Coal brands covered by the long-term contracts include 4
million tons/year from the state-run mine PTBA, 2 million tons/year from private mines run by Berau, and
a million tons/year from private Adaro mines. The remaining 3~4 million tons/year are covered by the
three-year contracts.

Coal procurement sources are shown in Tab.3-. While coals with 5,000kcal/kg in calorific value are
currently in use, the Unit No. 8 plans to use low-rank coals in the days ahead. It is because shrinking
availability of high-rank coals is likely.
Tab.3-7 A List of Indonesia Powers Coal Procurement Sources
Coal mine

PT. Bukit Asam

Use coal amount

calorific value

t/year

(Kcal/Kg) GAR

PTBA

Ratio

5,000,000

5,000

41.92%

PT. Berau Coal

1,500,000

5,000

12.58%

PT. Kideco Jaya Agung

1,000,000

4,900

8.38%

PT. Adaro

1,500,000

5,000

12.58%

PT. Cenko

480,000

5,000

4.02%

PT. Oktasan Baruna Persada

480,000

5,000

4.02%

PT. Natuna Energi Indonesia

480,000

5,000

4.02%

1,200,000

5,000

10.06%

288,000

5,000

2.41%

PT Pln Batubara
Spot
Total (annual quantity)

11,928,000

100.00%

Source: Indonesian Power

Required qualities are:


CV4,8005,000(GAR) Reversely speaking, no need for qualities over GAR 5,000.
Ash Max 5%
Sul

Max 0.4% Most crucial due to plant location near residential area.

HGI 4755Max 62 High HGI can cause clogging.

Max 62 is maximum mill load value.

AFT(IT) Min 1,180


Among other quality-related items requested to the mines are summarized in Tab.3-

99

Tab.3-8 A List of Requests Made to Mines


quality-related items

spec

Gross Calorific Value kcal/kg(as received)

<5.000 Kcal/kg

Hargrove Grindability Index

>

48

Total Moisture (as received)

<

28 %

Ash

(as received)

<

5%

Sulphur Content (as received)

<

0.4

Ash Fusion Temp. (Initial Deformation)

> 1.150 C

Nitrogen (as Received)

>

Slagging Index karakteristik Ash bituminous

<

Medium

Slagging & Fouling Index karakteristik Ash Lignitic

<

Medium

Content

%
%

Size
98 % 70 mmUnder

< 50mm

10 % 2.38 mmOver

< 2.38 mm

Source: Indonesian Power

Port unloading facilities are summarized in Tab.3-

Tab.3-9 Port Unloading Facilities


Pier

Use

Length

Draft
(m)

Facility

m
(m)

Jetty 1

Self Unloading Vessel

160

11.5

Conveyor

22000t/hr

Jetty 2

General Vessel

330

14.5

Conveyor

23500t/hr

SPOJ 1

Coal Barge

160

Conveyor

11000t/hr

SPOJ 2

Coal Barge

Extraordin

Bulldozers, etc.

ary pier

Source: Indonesian Power

Other information
New President Jokowi decides to perform power development 35,000MW within 5 years, and has
published the additional power plants using coal-fired main. (Coal-fired power was adopted because
of its outstanding economics and price competitiveness.)
Gov. (PLN)

15,000M

IPP

20,000M

Total

30,000M

Sulalaya power plant is not equipped with coal-blending units, and blending works are done by coal
suppliers.
New-brand combustibility tests are outsourced to a third-party testing firm (Interteck), while JT
Boyd is employed for making research on mines (reserve evaluation)

100

Of the coal suppliers from which Indonesia Power purchases coals, the top four consist of a state-run firm and
CCoW mines. The state-run mine, or PT. Bukit Asam (known as PTBA) is situated in the province of South
Sumatra, and its coals are hauled by rail from the province to the southernmost point of Sumatra, then forwarded
by vessel to end users at home and abroad. It is because PTBA is state-run why PLN is taking coals largely from
PTBA. PT. Adaro, located in South Kalimantan, is the largest mine in output terms.
located in North Kalimantan.

Also, PT. Berau Coal is

They both are giant mines listed in Tab.3-.

In selecting coals to fuel Anyer coal-fired power plant, the purchase sources of Sulalaya power plant provide
useful references. Particularly, as long as buying from major CCoW mines (PT. Adaro, PT. Berau Coal, Kideco
Jaya Agung) a supply disruption is unlikely. On top of PT mines, Fig.3- shows locations of PT. Aruthomin.
However, PT. Bukit Asam (PTBA), the state-run mine, is omitted. It is because PTBA, responsible for supplying
to domestic power plants, is thought to be harnessed by tight production-supply.

Fig.3-5

Transport Routes to Sulalaya Power Plant

Source Study Team based on JCOAL provide materials and information


Tab.3- contains data sheets on individual mines. Table 16 is designed to be used in selecting potential mines
as suppliers to Anyer power station. Shown in the upper columns are 7 mines by coal brand, each featuring a
calorific value of 5,000kcal/kg (GAR). Of them, the more reliable mines from stable supply aspect, which can
be main sources, are listed the more topside in the table, while candidate mines as spot sources are put bottom side.
In regard to their proven coal reserves, it is clearly noted that all of these mines cause few problems to the
operation of Anyer power plant. CIF prices in the table are calculated by adding to HPB price the costs incurring
in transportation to vessels. Because HPB price represents FOB price at river mouth, the transport cost from
mine to Java needs to be added. In reference to Tab.1-16 and Fig.3-,

101

this can be described with the formula

below (in case of a 2,100km-long transportation).


US0.005/tkm 2 ,100

kmUS10.5/t

2100kmDistance from Sulalaya plant to PT.Berau Coal


Meanwhile, Fig.3- shows where these mines are located. Locations of the mines to be explained in Case 2 are
illustrated as well.
Case 2
For Indonesia using low-rank coals is a crucial challenge toward the days ahead in a sense that shifts from
depleting bituminous-subbituminous coals are critical. PLN, in recent years, has been taking 4,200kcal/kg-coals
as low-rank coals for power generation. It is because 4,200kcal/kg is specified in the specification furnished to
IPP operators in Sumatra.7,8 There will be the descent from that coal use becomes mainstream 4,200kcal/kg class
in future so that this example shows it. It is expected that the new coal mine development of the 4,200kcal/kg
class advances in future from such a background, and it is thought that it is easy to get security of the supply that,
therefore, is stable about the coal of the class in the mid-and-long term The mines where coals of
4,200kcal/kg in calorific value were extracted are shown in the lower columns of Tab.3-.9

The contents are the

same as in Case 1. It is noted some of the major mines extracted in Case 1 are also selling low-rank coals.
However, in regard to prices, few are stated in HPB price terms, from which it is judged that traded amounts are
much limited than 5,000cal/kg-coals.

Just like the case of 5,000kcal/kg-coals, stable plant operation is assured if the main fuel is bought from major
mines and, therefore, it is recommended as a basic policy to choose coal brands from the mines located within
1,000km and run by such miners as Adaro and Arutmin, while inputting inexpensive spot coals bit by bit.
Few coal brands of 4,200kcal/kg in calorific value are currently supplied to the market. But, because
4,200kcal/kg-coals are the coals of which use is set to be backed by all-Indonesian supports, including the
Ministry of Energy and Mineral Resources, the likelihood is that an increasing number of brands will become
available, thus offering richer options.

All the coal-fired power plants of which development have been under way under the responsibility of PLN within the framework
of the First CRASH Program (PLNs captive power plant construction plan puts its total generated output at 10,000MW to be built by
2009, but the capacity completed under the plan remains at about 5,300MW as of 2014) are required to use low-rank coals of under
4,500 kcal/kg in calorific value.
8
No. 8 Unit at Sulalaya Power Plant, taken up in Chapter 3 (3) 5) Case Study Information of Sulalaya Power Plant, was also
installed under the above-mentioned plan. (Meanwhile, the No.8 Unit, a China-made generating capacity of sub-critical type, is
reportedly suffering frequent ill-functions.)
9
Extracted from JCOALs data on coal mines.

102

Tab.3-10

Fact sheet according to the coal mine brand according to the calorific value

Candidate Coal Mine for Power Plant (5000kcal/kg :GAR)


Quality

Cost Us/t
Rank

Main

Coal Mine

Brand

HPB

Barge to
Plant

Total

Area

Validity of

(ha)

License

License Type

Calorific V

Calorific V

cal/g(GAR)

cal/g(AD)

T,Moisture %

I,Moisture %

Resources(Mt)

Total

Volatile

Total Sul. %

Ash %

Matter %

(ADB)

Hardgrove Ash Fusion


Index

Temp.

52.65

57.65

35,800

16-Nov-32

CCoW

5100

5900

26

14.5

1.5

43

0.15

50

Arutmin Indonesia

Arutmin 5000

49.97

5.5

55.47

70,153

2-Nov-32

CCoW

4,750

5,300

18

11

35

0.2

45

1100

Berau Coal

Sungkai

48.13

10.5

58.63

118,400

26-Apr-33

PKP2B

5,000

5,500

26

18

5.5

38

0.9

47

1050

PT.Bukit Asam

BA59

55

0.5

55.5

66,080

2-Mar-31

Government

Cost Us/t

5900

28

13.1

40.4

0.6

Kideco Jaya Agung

Rota North

54.36

7.5

61.86

50,400

14-Sep-32

CCoW

4870

55

59

2,809

1-Jan-24

IUP

4800-5100

54.2

62.2

21,270

19-Feb-48

CCoW

5000

Lanna Harita Inonesia

Value A

5600-6000

Indicated

Inferred

Proven

2455

E5000

Kuansing Inti Makmur

Measured

Probable

Possible

Production (Mt/year)

(HGI)

Adaro Indnonesia

24.9

Reserves(Mt)

518

556

47.2

189

20

1291

476

21

7295

1377

13.5

720

1248

277

3.1

0.11

221

760

395

192

459

25

44.1

61.4

18.2

N/A

18.31

23.47

N/A

24-27

13

15-17

1-1.2

147.1

70.1

20-22

18

5-6

0.6-1.5

200.83

413.58

Candidate Coal Mine for Power Plant (4200kcal/kg:GAR)


Quality

Cost Us/t
Rank

Coal Mine

Brand
HPB

Main

Area
(ha)

Barge to
Plant

Validity of
License

Resources(Mt)

License Type

Total

Calorific V

Calorific V

cal/g(GAR)

cal/g(AD)

T,Moisture %

I,Moisture %

Production (Mt/year)

Hardgrove Ash Fusion

Total

Volatile

Total Sul. %

Ash %

Matter %

(ADB)

Index
(HGI)

Adaro Indnonesia

E4000

30

35

35,800

16-Nov-32

CCoW

4000

4850

40

27

37

0.15

60

Arutmin Indonesia

ECOCOAL

26

31

70,153

2-Nov-32

CCoW

3,859

4,793

32

16

35

0.2

50

PT.Bukit Asam (PTBA)

IPC53

32

0.5

32.5

66,080

2-Mar-31

Government

4115

5300

34

15

39

0.5

Energi Batubara Lestari

Original EBL Coal

32

37

1,894

1-Jun-36

IUP

4313

5300-5400

30-35

14-18

1-3

42

0.06-0.15

30

2.8

32.8

4,395

23-May-48

IUP

4017

5413

36.6

14.56

6.58

35-38

18

5-6

37.4

15.1

5.7

Gorby Putra Utama

Reserves(Mt)

Temp.

Measured

Indicated

Inferred

Proven

1675

1100

518

720

1248

277

7295

Probable

305

47.2

189

20

1733

13.5

60

44-45

0.42

55.2

16.7

200.83

413.58

32

39

Possible

3.6

64.4

41.4

Under Construction

18.31

23.47

N/A

13

32

Under Construction

Sub
Lanna Harita Inonesia

Value C

32

40

21,270

19-Feb-48

CCoW

4200

Tunas inti Abadi

TIA5300

26

5.5

31.5

3,074

16-Mar-25

IUP

3960

5370

40

0.6-1.5

0.15

1160

35

CV(GAR)=(100-TotalMoisture)/(100-InharentMoisture)CV(ADB)
HPB = FOB/Vessel

Barge to Plant = 0.005 US/tkm Distance

Source Study Team based on JCOAL provide materials and information

103

Fig.3-6

Locations of Candidate Mines for Anyer Power Station

Kalimantan

Bituminous coal
Sub-bituminous coal

Sumatra

Lignite

Java

Source Study Team based on JCOAL provide materials and information

104

(4) General Descriptions of the Project Plan


1) Basic policy applied when determining projects contents
When FS works were proposed on the formation of this project, etc., the technology model and output assumed
for the project were USC and 600,000kW in reference to coal-fired power plants currently in operation in Japan,
which includes Unit No. 5 (600,000kW; USC; bituminous coal-fired; main vapor temperature set at 600;
commissioned in July 2004) and Unit No. 6 (600,000kW; USC; bituminous coal-fired; commissioned in
December 2013) at Hirono Plant run by Tokyo Electric Power Co. (TEPCO).
As for coal ranks, assumed at the onset were a wide range of coal ranks, including Indonesias
indigenously-produced bituminous and subbituminous coals and overseas ones.
In the subsequent research process, through such efforts as literature studies and interviews made to JCOAL
and others, it was found that Indonesias energy policy positioned bituminous coals chiefly as exportable goods
and attached the importance to subbituminous coals for domestic use. In price terms, the use of subbituminous
coals was found reasonable as well.
Also, from the interview survey made to PLN last November, a suggestion was gained that a designed output of
USC, if fired by Indonesian subbituminous coals, needs to be more than 800,000 kW at least.
On top of it, literature survey results showed that, concerning USC fired by Indonesian subbituminous coals,
there were plans for building a plant of over a million kW in terms of single-unit capacity, but plans for a
single-unit capacity construction of under a million kW were completely absent (See the References below.)
Also, hearing from the Japanes experts and referring technical literature, we found that when using the juicy
Indonesian sub-bituminous coal, since the corrosion of the material is likely to proceed at high temperature and
high pressure, requires expensive materials to prevent corrosion, scale output scale of one million kW (1,000
MW) class is necessary.
From these results, it is found that a 600,000-kW USC running on Indonesian subbituminous coals is thought
not impractical at all in technical terms. Yet, without any records of actual operation nor planning, USC of over
600,000 kW is filled with unknown risks as a proven unit, which intensifies its character as a demonstration unit.
Consequently, with the use of Indonesian subbituminous coals premised, the FS was newly designed to cover
not only USC (Ultra Super Critical) but also other types, including SC (Super Critical), Sub-C (Sub-Critical) and
CFB (Circulating Fluidized Bed).

105

(Reference 1) Definitions and Others of Available Technologies Incl. USC and SC


Tab. 3- 11 Definitions and Remarks of USC, SC and Sub-C
Technology

Definitions/Remarks

Ultra Super Critical (USC)

Technology of super-critical (SC) type of which main vapor temperature exceed 566.
To be built in large capacity and not practical in small one.
Technology with vapor pressure of over 22.1MPa and main vapor temperature of over

Super Critical (SC)


566.

Depending on design, thermal efficiency as good as USC can be gained.

Technology with vapor pressure of under 22.1MPa. Drum-type boiler model.

Sub-Critical (Sub-C)

Large

power plants employ USC and SC featuring good thermal efficiency, while Sub-C is
popularly in use in small plants.

Source: The Ministry of Environment, On-going Commercialization and Development Efforts of the State-of-Art
Generating Technologies BAT Reference Table (As of April 2014)

(Reference 2) Actual Records & Plans of Coal-fired Power Plants of USC Type in Japan (Examples)
Tab. 3- 12 Actual Records & Plans of Japans Coal-fired Power Plants of USC Type (Examples)
Operator
TEPCO

Chubu

Plant

Unit No.

Stage

Commissioned in

Output

Unit No.5

Running

July 2004

600,000 kW

Unit No.6

Running

December 2013

600,000 kW

Unit No.3

Running

April 1993

700,000 kW

Unit No.4

Running

November 2001

a million kW

Unit No.5

Running

November 2002

a million kW

Running

April 2002

600,000 kW

Running

July 2009

Hirono

Electric
Hekinan

Power
New
Electric

Unit

No.1

Power
Isogo

Development Co.

New

Unit

562,000

No.2
New

kW

(provisional)
Unit

Takehara

Abuilding

Sept., 2020 (slated)

600,000 kW

2021(planned)

600,000 kW

2027 (planned)

600,000 kW

Around 2021 (planned)

650,000 kW

Around 2020 (planned)

650,000 kW

No.1
Electric

Power

New

Development Co.

Unit

No.1

Planning
(Assessment)

Takasago
New

Unit

No.2
Hitachinaka
Hitachinaka

Generation

Planning
(Assessment)
Planning
(Assessment)
Planning

Kashima Power

Kashima

Unit No.2
(Assessment)

Note) All of USC units in Japan, those currently running and planned alike, are thought to be designed for using bituminous
coals.

Source: Prepared by E&T from various materials.

106

(Reference 3)
Indonesias Introduction of Coal-fired Power Plants of USC Type and Coal Ranks in Use: Actual Records & Plans
Introduction records
So far no USC units have been introduced yet.
Introduction plans
Shown in the table below are the plans to introduce USC units, each designed to be a million kW in
single-unit-capacity terms.

Tab. 3- 13
Plant Name

Output

Location

Indonesias Plans for USC Introduction


Coal Rank in

Utility

Use

Type

On stream

Operator

Unit No.1:

BPI (Bisemana

around
2 mil.
Batan Province,
kW
Batan

2016

Subbituminous

yearend

coals (from

Indonesia);
joint

Due

to

residents

Power

Central Java(226
(1 mil.

Remarks

opposition,

venture

delays

are

by

likely

in

IPP
Unit No. 2:

Indonesian

invested

around

mines)

EPDC,

Adaro

Power

and

ha)
kW 2)

mid-2017

Itochu, Inc.
Under exam.

starting
plant
operation
An ODA

Fed to
1 mil.

Indramaju, West

March

(Indonesian

Indramaju
kW

Java Province

2019

PLNs

low-rank coals

project (yen
PLN
loan

grids
very likely)

provided)

Source: Prepared by E&T from various materials.

In addition to those cited above, PLN now puts Jawa-1Jawa-4Jawa-5Jawa-6, shown below, under
consideration. While their details are not available, all of these under consideration are planned to be of USC
type of a million kW in a-single-unit-capacity terms. -

107

Fig. 3- 7

USC/SC Power Plants Planned or Under Consideration by PLN (incl. IPPs)

Source: I Made Ro Sakya (PLN), Current Status and Future Development of Coal Thermal Power Plant in
Indonesia (2013.9)
Fig. 3- 8

Indonesias Roadmap of Clean Coal Technology (CCT)

Source: I Made Ro Sakya (PLN), Current Status and Future Development of Coal Thermal Power Plant in
Indonesia (2013.9)
Original Source: JICA CCT Study, October 2012, with updated projects and schedule by PLN

108

(Reference 4)
Indonesias Introduction of Coal-fired Power Plants of SC Type and Coal Ranks in Use:
Actual Records & Plans
Introduction records
Tab. 3- 14

Indonesias Records of SC (Super Critical) Introduction

Utility
Plant Name

Output

Location

On stream

Coals in use

Operator

Remarks

type
Paiton Energy:
Paiton III

Indonesias first

Invested by TEPCO,
SC plant(made

(additional

815,000

installed

kW

Subbitumin
Paiton

March 2012

Mitsui & Co.,


IPP

ous coals

by Mitsubishi
International Power
Heavy

capacity)

Co. and Batu Hitamu


Industries)
Berukasa
West

Heat value

Chirebon

5,000kcal/k

Cirebon
660,000
Chirebon

July 2012
kW

District,

IPP

Electric

Indonesias

Power: Invested by

second SC plant
Marubeni and others.

Cilacap

Java

(estimated)

Adipala,

Heat value

Fed into

5,500kcal/k

PLNs

Technical Import and

grids

Export Corporation

660,000
Baru/Adipal

Central

2014 (slated)

China National

kW
a

Indonesias
third SC plant

Java

Source: Prepared by E&T from various materials.


Introduction plans
Specific plans for introducing coal-fired power plant of SC type are not disclosed. Judging from its capacity,
Banten Plant (625MW, to be put on stream in 2016) shown in the chart above can be of SC (super critical) type,
though its details are not available.
Meanwhile, in its Power Supply Service Plan 2012-2021, PLN puts that power plant candidates now under
consideration for the Java-Bali System Development Plan are a 1,000MW-class coal-fired plant of USC type, a
600MW coal-fired plant of SC type, a 750MW natural gas-fired plant, and a 200MW oil-gas combined power
plant and a 250MW pumping-up plant, with the latter two designed for meeting peak demand.

109

2) Contents of the proposed project

a) Appraisal bases/preconditions
With this FS works (on project formation and others), the appraisal bases/preconditions tabulated below are
preset, based on which the most optimal types of utility and technology as of now, to be identified while taking a
host of restraints into consideration, are proposed.

Tab. 3- 15 Appraisal Bases/Preconditions


Degree of importance

Appraisal Bases

How

helpful

Indonesias

power

in

Explanations

easing

supply

&

The greater inverse current to PLN makes the

For Indonesian

For

public interest

AGC/ASC

higher contribution.
demand
SPCs benefits (profits, etc.)

The higher SPCs profitability leads to the higher


investment values and returns.

With management already squeezed by sharply


ASCs benefits (economics, etc.)

raised electricity tariffs for large industrial


customers, power cost cuts is a matter of top
priority.

In line with Japans Projects to Help Promote


Infrastructure/Systems
Use of Japans official finance

of

Energy

Supply-Demand Mitigation Type, to put Japans


official finance, notably JBICs, to the best use is
essential.

In line with Japans Projects to Help Promote


Use

of

outstanding

Infrastructure/Systems

of

Energy

technologies/know-hows owned

Supply-Demand Mitigation Type, to put Japans

by Japanese firms

technologies/know-hows, in both hardware &


software facets, to the best use is desirable.

Symbol that describes the "importance" column of the table above is one in which the study team was given by
the basis of the following.
A. How helpful in easing Indonesias power supply & demand
Importance to Indonesia of public interest:
"Energy supply and demand relaxation type infrastructure system dissemination promotion Business", has been
one of the aims "to contribute to the relaxation of the world's energy supply and demand, to achieve a secure
stable supply of energy to our country."
110

And mitigation of power supply and demand in Indonesia is a very urgent issue for Indonesia suffering from
power shortages, that contribute to Indonesia of public interest, not waiting for the word.
Importance to AGC / ASC:
The Indonesian power supply and demand is easing, it leads to management stabilization and rising cost
suppression of Indonesia domestic relations companies and suppliers that do not have their own power plants,
thus leading to management stabilization of AGC / ASC.
B. SPCs benefits (profits, etc.)
Importance to Indonesia of public interest:
If SPC benefit (income, etc.) translates into higher yields, make the investments to improve the return and
profitability of Indonesian institutions, also contribute to the expansion of tax revenue and employment.
Importance to AGC / ASC:
If SPC benefit (income, etc.) translates into higher yields, the management of the power generation business
stabilized by PPU, to contribute to the stabilization of power long-term stable supply and electricity charges of.

C. ASC benefit of (economic, etc.)


Importance to Indonesia of public interest:
Thousand beneficiaries of ASC to hire a scale (profitability, etc.) An increase, stabilization and expansion of
local employment, which leads to the expansion of tax revenue of local government.
Importance to AGC / ASC:
The ASC benefit (income, etc.) that is growing is important for AGC / ASC does not wait the word.
D. Use of Japans official finance
Importance to Indonesia of public interest:
Japan of public finance that is utilized is consistent to the Indonesian government's policy to welcome the spirit
of the "energy supply and demand relaxation type infrastructure system dissemination promotion business",
and the introduction of foreign capital to the power development.
Importance to AGC / ASC:
Take the AGC / ASC, and if it is possible to receive a low-interest loan from JBIC, a large economic benefits.

E. Use of outstanding technologies/know-hows owned by Japanese firms


Importance to Indonesia of public interest:
Japanese companies that are doing a power development by leveraging the superior technology and know-how
possessed by, short term as well as to contribute to Indonesia's power supply and demand relief, long-term
supply capacity through the high-quality hardware and O & M leads to the maintenance of, and also lead to
technology transfer to Indonesia of these technologies and know-how.
Importance to AGC / ASC:
For the AGC / ASC, cost and quality surface from a global point of view is also optimal procurement important,
including, not necessarily take advantage of the best solutions of technology and know-how of Japanese
companies.

111

As noted from the table above, the degree of importance judged from the perspectives of Indonesian public
interest naturally differs from the degree of importance determined from the perspectives of the host firms for the
proposed project (AGC/ASC).
With this FS works, the importance for Indonesia public interest is taken as a matter of vital significance. Yet,
given the current situations where the host firms for the planned project are hit seriously by Indonesias surging
electricity tariffs, it is believed that solving the power cost problem swiftly in efficient and effective manners can
also contribute to Japans industrial policy (= to strengthen international competitiveness of the Japanese
manufacturing industry and smoothen global evolution). Hence, by attaching a great importance to ASCs
benefits (particularly economics) as well, this FS works are designed to offer a well-balanced solution (in terms of
utility and technology types) from the all-embracing aspect.

b) Business model
Concerning business model for the proposed project, it was planned at the onset that, in the capacity of IPP,
output equivalent to 300,000kW out of a total of 600,000kW generated should be supplied to ASCs local plant,
with the remaining 300,000kW sold to PLN.
However, later, when an interview survey was made to the Ministry of Energy and Mineral Resources (MEMR),
it became evident that IPP was required to sell the whole output to PLN without exception, thereby there was no
choice but to scrap the IPP model.
Instead, the MEMRs information provided during the interview suggested a possibility to adopt a business
model featuring PPU (Private Power Utility), the third electric utility form (after PLN and IPP) endorsed under the
New Electricity Act.
PPU, a kind of electric power supplier falling in Article 9-a (power supply services for public use), is private
entrants into the public-use power supply sector served chiefly by PLN.
This PPU model, if employed, would enable ASC to receive power supply from a third party, including SPC,
which is engaged in retailing at one hand and, at the other, allows power producers, like SPC, to sell part or whole
of their generated output to PLN.
Also available is a buy-back system, which enables a power producer once selling the whole output to PLN to
buy back part of output from PLN. In case part of output is sold, the selling price applicable to the SPCPLN
trading is settled by B-to-B negotiations, while the selling price applicable to the SPCASC trading is also
settled by B-to-B negotiations, but, must be approved by the local government.
In the meantime, when a third party, like SPC, intends in the capacity of PPU to offer distribution and power
retailing services to a consumer (ASC), WU acquisition is required under Article 10 (3)~(5) of the New Electricity
Act.

(WU stands for Wilayah (area) and Usaha (business) = Business Area). If well-negotiated with the

MEMR, PLN and the local government (Cilegon City) unofficially beforehand, WU can be acquired in two
months at the shortest.

Based on the above, the most promising business model is as follows:

112

Type of utility: PPUPublic Power Utility


Statutory basis: New Electricity Act (Article 9-a, among others)
Power producer: SPC
Part of generated output is retailed from SPC to ASC via distribution lines within its plant site.
In parallel, part of generated output is sold from SPC to PLN.
Ratio of AGC/ASC capital contribution: Under consideration
(AGC/ASC is recommended to make capital contribution to a degree as significant as allowing them to
have an influence on SPC management, which is thought desirable.)
Capital contribution by other firms: Under consideration
JBICs project finance: Interview-survey results show that the project finance can be gained if the
following conditions are met:
Investment of which chief objective is not earning investment returns merely but starting business in specific forms.
Essentially O&M of power plant must be awarded to Japanese firms (ASC or O&M-outsourced firm).
It is desirable that many Japanese firms technologies are involved.

Yet, plant equipment, including generator, need

not necessarily be Japan-made and foreign-made are acceptable.


On capital contribution ratio in the host entity for power plant operation, Japanese firms should hold more than 30%
of the whole stake.
On management of business operation (including decision-making), Japanese firms should be involved positively
and continuously in the long run, typically for 30 years.
Good profitability of SPC and others also poses a crucial factor.
Off-taker (= power purchaser) should purchase power constantly over a long period.

The principal business of

power consumer should be sustainable in the long run, typically over 30 years.

c) Technology
Originally USC/600,000kW was assumed as a recommended technology system. But, as a result of
aforementioned particulars, the use of Indonesian subbituminous coals was taken as an essential precondition and,
accordingly, the FS works were made by examining not merely USC (Ultra Super Critical) but also SC (Super
Critical), Sub-C (Sub-Critical) and CFB (Circulating Fluidized Bed) as technology candidates.
The model that was considered most promising is shown below.
Scale (generated output & retailing/power-selling capacities)
Generated output:

450,000/600,000 kW

Retailed from PPU (SPC) to ASC: 300,000 kW


Power sold from PPU(SPC) to PLN: 150,000/300,000 kW

113

Fig. 3- 9 Power System Configuration

PLN Grid : 150kV


SWON

PLN Grid : 150kV

SWOFF

SWOFF

SWON
Backup

150
300MW

275MW
SWON

SWON

SWOFF

SWON

275MW
450
600MW

ASC
Power Load

PPU

Normal Operation

ASC
Power Load

PPU

During periodic inspection


and emergency

Technology types
USC (Ultra Super Critical), SC (Super Critical), Sub-C (Sub-Critical) and CFB (Circulating Fluidized Bed)
have such features as tabulated below.

Tab. 3- 16

Characteristcs of each technology

Output of a practical single unit


Acceptability of coal

Type

Bituminous coals

Subbituminous

in use

coals in use

Gross thermal
Japanese manufacturers

ranks

Bituminous

efficiency (HHV)

and
Japan: 900,000a

subbituminous coals

MHPS

(Mitsubishi

alike acceptable, but

Heavy

the latter increases

Industries/Hitachi),

lower

Toshiba, IHI

mil. kW: 43%


USC

(Ultra

Super
600,000 kW

700,000

800,000 kW

Critical)

kW:

42.5% 600,000
limit

of

kW: 42%
output.
MHPS(Mitsubishi
Bituminous

and
Heavy

subbituminous coals
Industries/Hitachi),
SC (Super Critical)

alike acceptable, but


500,000 kW

Japan:
Toshiba,

600,000 kW

IHI;

kW: 42.5%HHV

the latter increases


competitions likely with
lower

limit

of
overseas

makers

output.
(particularly Chinese)

114

500,000

Cost

Output of a practical single unit


Acceptability of coal

Type

Bituminous coals

Subbituminous

in use

coals in use

Gross thermal
Japanese manufacturers

ranks

efficiency (HHV)

IHI is outstanding in
Sub-C (Sub-Critical)

Over 200,000 kW
is popular.

Both bituminous and

both

technology

and

subbituminous coals

cost.

acceptable

various makers including

Popularly over

Japan:

200,000

Among others,

200,000kW

kW41%
overseas ones
Sumitomo

150,000kW,
CFB

(Circular

Fluidized Bed)

for

etc.

for

Industries is outstanding

IPPs;

15,000~70,000kW

Heavy

Same as left.

in-house

A wide range of

in

rank

With

acceptable

power producers

coals

technology
cost

terms.
included,

(Under study)

overseas makers, notably


Taiwanese,

can

be

candidates

(Remarks)
In case USC is employed, the lower limit of output from a proven unit (currently in operation), if fueled by
Indonesian subbituminous coals, stands at around 800,000 kW (Note: Indonesias plans suppose a single-unit
capacity of a million kW alone). Accordingly, a USC unit of 600,000 kW planned for this project cannot be
a proven level but a demonstration stage.
In case of SC, a single-unit capacity of 600,000 kW is practical when fueled by Indonesian subbituminous
coals. However, cost competitions are likely with overseas manufacturers, notably Chinese makers.
In case of Sub-C and CFB, 400,000~600,000 kW is practical with Indonesian subbituminous coals in use.
With these features taken into consideration, combined with the aforementioned appraisal bases, the FS works
undertaken this time puts forth the technologies and their specifications that are considered most optimal from
overall aspects.
The technologies and their basic specifications, which are reckoned most promising, are stated below.
Case 1
Technology: SC (Super Critical)
In general, the main steam temperature of supercritical (SC) is 566 or less, and the main steam
temperature of ultra-supercritical (USC) over 566 . The main steam temperature of this plant is
566 , so by definition this is supercritical (SC), but it is close to ultra-supercritical (USC).
Output: 600,000 kW x a unit = a total of 600,000 kW
PPU (SPC) retails 300,000 kW to ASC, and sells the remaining 300,000 kW to PLN.
Because ASCs power load lasts 24 hours in principle and remains stable relatively, the amount of power
sold to PLN stays constant except the periodical inspection time stated below. In other words, ASC can
be a reliable power supply source for PLN.
115

Backups during periodical inspection time: Backups equivalent to 300,000 kW (to cover ASCs power needs)
is offered by PLN.
Case 2
Technology: CFB (Circulating Fluidized Bed)
CFB may also be applied to sub-bituminous coal of Indonesia of low calorific value.
Output: 150,000 kW x 3 units = a total of 450,000 kW
PPU (SPC) retails 300,000 kW to ASC, and sells 150,000 kW to PLN
Because ASCs power load lasts 24 hours in principle and remains stable relatively, the amount of power
sold to PLN stays constant except the periodical inspection time stated below. In other words, ASC can
be a reliable power supply source for PLN.
Backups during periodical inspection time: During a periodical inspection, a unit (150,000 kW) alone is halted
and power sale to PLN is also suspended. In other words, ASCs plant load (300,000 kW) is covered with
the remaining two units (150,000 kW x 2 units = 300,000 kW).

116

3) Conceptual design and specifications of candidate equipment


In line with the aforementioned basic policy and, also, in reference to coal-fired power plants (fueled by
subbituminous coals) of identical size and type available in Indonesia, among others, basic specifications of
candidate equipment, presented in the two cases cited in the preceding section, are determined.

a) Site and major equipment

Fig. 3- 10

An Air Overview of ASCs Anyer Plant

Note: The power plant is slated to be built on the site enclosed with the dotted line.
Source: Google Map

The site (captive) slated for the new power plant by ASC is located on top right in the photo above and covers
an area of 40ha at maximum.

The 40ha-site include a small hill. With the hill left as it is, an effective area for

plant construction turns to be 15ha, which could be enlarged up to 40ha if the hill was levelled.

Within this site, housed will be the equipment cited below:


Generating equipment, etc: Boiler, turbine, generator, flue-gas treatment systems (electrostaticprecipitator
(ESP), desulfurizor, denitrificator)
117

Incidental equipment for common use: Water treatment system, waste water treatment system, refueling
tank (for auxiliary oil for start-up)
Fuel storage equipment (coal stockyard): Of silo type capable of preventing increases in the moisture
content caused by rainfalls
Other equipment: Unloder, coal forwarding system
Of these, the area required for housing the generating equipment, etc. will be around 6ha in Case 1, and around
5ha in Case 2, in reference to exising cases. By virtue of designing, however, the both can be made more
compact.
It should be noted that for the ash dump, I entrust the coal ash processing to external contractors.

Fig. 3- 11

Plant Layout (Case: SC, 600MW1

0m
100m

Thermal effluent
discharge device

Cooling seawater
pump

Chimney
Induced Draft Fan IDF

200m

Flue gas treatment


equipment

Supercrtical
boiler

300m

Turbine
building
(Including
generator)
Turbine transformer

Electric
substation
equipment

400m
Wastewater
treatment facility

Coal storage yard

500m
0m

100m

200m

300m

118

400m

500m

600m

3- 12

Plant Layout(Case 2: CFB, 150MW3

0m
100m

Thermal effluent
discharge device

Cooling seawater
pump

200m

Chimney
Induced Draft Fan IDF

Flue gas treatment


equipment

CFB boiler

300m

Turbine building
(Including
generator)
Turbine transformer

Electric
substation
equipment

400m

Oil tank for start-up

Wastewater
treatment facility

Coal storage yard

500m
0m

100m

200m

300m

119

400m

500m

600m

Fig. 3- 13

An Air Overview of ASCs Anyer Plant (Left Part of the Site)

Note: The slated plant construction site is located chiefly in the left part of the photo.
Spurce: ASC, Company Profile

b) Generated output and type of the power plant


In accordance with the two cases set in 2), generated output and the types are:
Case 1 SC (Super Critical)

600,000 kW x 1 unit

(In-house use 25,000 kW, to PLN: 300,000 kW,

to ASC: 275,000 kW

Case 2 CFB(Circulating Fluidized Bed) 150,000 kW x 3 units


(In-house use 25,000 kW, to PLN: 300,000 kW,

to ASC: 275,000 kW

c) Steam conditions and others


Steam conditions and others designed for the power plants are set as shown in the table below based on existing
design/introduction cases in Indonesia, etc.
Tab. 3- 17 Power Plants Steam Conditions and Others

Vapor amount

Case 1 (SC)

Case 2 (CFB)

1,810t/h(100% load)

475t/h/unit3(100% load)

246 kg/cm

174 kg/cm2

Main vapor temperature

566

541

Rehea tvapor temperature

566

541

Thermanl efficieny

40.5%

37.6%

Main vapor pressure

120

The unit designed for Case 1 is categorized as SC (Super Critical) because its main vapor temperature stands
below 566. Yet, given that the main vapor temperature and the reheat vapor temperature alike stays at 566,
the boundary distinguishing SC from USC, the unit designed for Case 1 is given the specifications that allow the
unit to be named a quasi-USC.

d) Coal calorific value


As for coals to be in use, the two cases examined in the section (3)-5 Fuel Procurement are employed.
Namely, attaching importance to the likelihood of constant coal supply security in the medium and long run,
coals in use are described below.
Case 1: SC (Super Critical) 600,000 kW x a unit
Coals of 5,000kcal/kg in calorific value are in use similarly to PLNs plants.
Case 2: CFB (Circulating Fluidized Bed) 150,000 kW x 3 units
Coals of 4,200kcal/kg, most likely ranks to form the mainstream ahead, are in use.
e) Annual coal requirements
Referrig to existing design examples and taking coal calorific value in use into consideration, coal consumption
per hour is calculated as follows:
Case 1: 255 t/h
Case 2: 81.7 t/h/unit x 3 units 245 t/h
Based on the above, annual coal requirements are calculated as follows:
Case 1: 255t/h8,200hrs/y (=annual hours 8,760hrs/yperiodical inspection 560hrs/y 2,089,481 t/y
Case 2: 245t/h8,200hrs/y 2,009,498 t/y
f) Coal stocks
The amount of coal stocks varies depending on how much coals are received one time by the power plant in
what frequencies. Yet, in general, it is popularly in practice to keep coal stocks at a level equivalent to around
1~2-month requirements for plant operation.
This plant uses the coals from the mines in Kalimantan and Sumatra, the both located near Java. Therefore, by
taking the advantage in transportation into account, required coal stocks are assumed to be equivalent to a-month
(30-day) consumption.
It is also assumed that coals are stored with a silo system employed. Based on these assumptions, 30-day coal
stocks are calculated as follows:
Case 1: Hourly coal sonsuption x 24hrs/d30 days255t/h24hrs/d30 days183,467 t
Case 2: 245t/h24hrs/d 30days176,444 t
g) Ash dumping yard
Coal ash processing and dumping will be entrusted to external contractors.

h) Water intake/discharge
Cases 1 and 2 alike use seawater as cooling water for their steam turbine condensers. Seawater is taken from

121

the sea fronting the plant, while used seawater with raised temperatures should be discharged from a fairly distant
point (about 1.5km away) from the intke in order to prevent recirculation.
The intake method is designed after an open channel system, with a conduit installed from the intake to inland,
and a pump house is provided nearby the power plant. The pump house is equipped with a screening system,
chlorine feeding system and so on.
Cooling water is pipelined whenever it is forwarded in the route of pump house~power plant~discharge point,
with the pipelines buried underground.

i) Specifications (a summary)
As a summary, major specifications are tabulated below:

Tab. 3- 18 Basic Specifications of the Power Plant

Case 1

Case 2

SC (Super Critical)

CFB (Circulating Fluidized Bed)

600,000 kWx a unit

150,000kW3450,000kW

25,000kW

25,000kW

4 Output sold to PLN

300.,000kW

150,000kW

5 Output supplied to ASC

275,000kW

275,000kW

8,200hrs/yrated running

8,200hrs/yrated running

1,810.0t/h

475.0t/h/unit3

(100% load

(100% load)

246.0kg/cm2

174.0kg/cm2

566

541

10 Reheat vapor temp.

566

541

11 Thermal efficiency

40.5%

37.6%

5,000kcal/kg (Indonesian

4,200kcal/kg (Indonesian

subbituminous coals)

subbituminous coals)

13 Coal use (hourly)

255 t/h

245 t/h

14 Coal use (yearly)

2,089,481 t/y

2,009,498 t/y

Type

2 Generated output
3

In-house consumption

6 Annual running hours


7

Evaporation amount

Main vapor pressure

Main vapor temperature

12 Coal calorific value

122

4) Subjects accompanied when employing the proposed technologies/systems and their solutions

Adopting a supercritical pressure power generation technology, there is a big advantage such as high efficiency
of the plant can be achieved.
On the other hand, unlike the existing power plant, the automation of new plants, personnel training operation
and maintenance is extremely important. Therefore, installation of simulator of power generation equipment, is a
more substantial problem of measures of training equipment and operation and maintenance training.
Also, because the water quality management of boiler water is very important in supercritical pressure power
generation equipment, water quality management of training at the time of acquisition and operation of knowledge
about water quality management is also important.
The EPC turnkey contract, in equipment installation and commissioning, receive performance guarantee items
to be specified in the contract are met, after the implementation of the project who has examination that there is no
equipment defects, it is equipment delivery.
In order to perform this examination to ensure properly technology negotiations for EPC contractor, it is
necessary to have the advanced technology and knowledge of power generation facilities.
In addition, it is also considered that also various technical problems occur commercial operation started later,
these technical problems are properly resolved, in order to properly technology negotiated with EPC contractor,
technical assistance by the power generation facility specialists it is desirable to receive.
Currently, in Indonesia, the mainstream is coal-fired power generation of subcritical pressure, even those made
in China for many, many things that it is stopped in trouble.
Enhancement of O & M will lead to the improvement of the improvement and profitability of the equipment
utilization rate of power generation facilities, and lead to the improvement of the reliability of investment
institutions to SPC, including the JBIC.

123

Chapter4
Evaluation of Environmental and Social Impacts

(1) Status-quo Analysis on Socio-Environmental Aspects


1) Analysis of status-quo
Construction of new coal-fired power plants in Indonesia, greatly expected for its contribution to easing
tightening electricity supply-demand problem at one hand, is also feared to be risk-inflicted in such points as
generally causing environmental problems, like air pollution, water pollution and GHG emissions, and invoking
opposition by local residents (resulting from possible impacts on their occupational/living environment,
land-expropriation troubles and so on). On-going situations in Indonesia are summarized below.

a) Status-quo of environmental problems


Air pollution
In Indonesia, where rapid industrialization has been under way since the 1980s and on, air pollution is
aggravating particularly in metropolitan cities cheifly due to growing pollutants, typically nitrogen oxides, sulfur
dioxide and particulates, all attributable to surging fossil fuel consumption. Pollution caused by flue gas and
others from industrial sources still remains limited. The actual state unveils particularly worsening atomospheric
environment accelerated by choronic congestions which result from poorly-installed urban traffic systems, notably
railway.
Fig4-1

Roadside

NO2 and SO2 Concentrations in Major Cities in Indonesia10

Industrial
zone

Residential
district

Commercial
district

Roadside

Industrial
zone

Residential
district

Commercial
district

Note) The mark put on Cilegon City was made by the Study Team when editing
Water pollution

Source: State of the Environment Report Indonesia 2012

10

Based on the Ministry of Environments Monitoring Program. Of the box diagram (showing data distribution of 248
counties/cities covered by the research), top and bottom of the box represent 75%-25% values, each, and the bar shows the maximum
value among the data. The data outside the range and marked with and represent singular values. High NO2
concentrations are observed in Jakarta and other metropolitan cities, including Cilegon were the project site is located.

126

On water pollution, out of organic polluting loads, 25~50% is allegedly attributed to industrial effluents, and
50~75% to living effluents. As for industrial effluents, such industries as textile, pulp/papermaking, plywood
and rubber can be cited as major sources. Large plants, typically those run by Japan-affliated firms, are
well-equipped with waste water treatment equipment which assures adequate management, while small- and
medium-sized local plants, in not a few cases, do not have such equipment and discharge their industrial effluents
into rivers without any treatment. As a result, pollution of rivers are getting worse due to heavy metals, etc.

In addition, with few sewage installed, living effluents are left free either penetrating underground or
discharged into rivers without any treatment, the both contributing to aggravating pollution of rivers and
underground water.

Usually, well water is used as living water. But, without purified, effluents penetrating

underground contaminate water, which is drawn from the well in some cases. This situation, combined with
contamination of river water, which is another living water source, highlights worsening water pollution as a
serious problem from hygienic aspect.
Waste management
Wastes are grouped into hazardous wastes (usually called B3 Wastes after the initial letters of three
Indonesian words each meaning dangerous, hazardous and toxic) and other wastes. It is the so-called B3 Wastes
that are becoming a big problem in Indonesia. In Indonesia few waste dealers are capable of offering perfect B3
Waste treatment. Accordingly, at present B3 Wastes are stored within ones site when they cannot be outsourced.

As for any industrial wastes other than hazardous materials, they are outsoured to professional collectors, by
whom they are either landfilled or incinerated. In regard to living wastes generated from households, they are
often thrown away to rivers and/or vacant lots as they are, thus posing a major cause of water pollution of rivers,
etc.
Greenhouse gas (GHG) emissions
In 2000 Indonesias total GHG emissions in net amounted to 1.37GtCO2e. Of it cited as the largest source is
defrosration, responsible for 48%, followed by fuel consumption at 21%, peat fire at 12%, wastes at 11%,
agriculture at 5% and industrial sector at 3%. When combined, emissions resulting from defrostration and peat
amounted to 0.821GtCo2e, which accounts for 60%, with the remainder staying at 0.556GtCo2e. This level of
emissions is so high that Indonesia is joining among the worlds top 10 countries as GHG emitters. Because of
fuel switching under way to carbon-rich coals, the growth of domestic GHG emissions is outgrowing the GDP
growth and the fuel consumption growth, and is positioned as a grave environment problem in Indonesia today.

In an attempt to deal with its GHG emission problems depicted above, the Indonesian government founded the
National Climate Change Committee in 2008. Given that the country pledges a 26% cut in GHG emissions by
2020, which would be further increased to a 41% cut under cooperation of industrialized countries, the countrys
environmental policy needs to be watched carefully.

b) Land use/development (environment around the proposed project site)

127

Cilegon, where the site slated for the proposed project (within the site of Anyer Plant owned by Asahimas
Chemical Co.), is a coastal industrial city situated in the westernmost Banten State in Java island. It is the center
of Indonesias heavy chemical industry where many steelworks and petrochemical plants are located.

This area, where Krakatau Steel Co., the largest steelmaker in Southeast Asia, is located, forms Krakatau Steel
Industrial District. Aside from Krakatau Steel Co. and Krakatau POSCO Co., many plants run by such
companies as Siemens AG, Asahimas Chemical Co., Chandra Asri Petrochemical Co. and Pertamina (state-owned
oil/gas corporation run by the government of the Republic of Indonesia) are integrated in this area and, thus, the
zone of this area has been developed well as an industrial district.

Fig4-2

Peripheral (Cilegon - Krakatau Steel Industrial Zone) of industrial clusters

Sulalaya Power Plant

Krakatau POSCO

Pertamina

Krakatau Steel

Asahimas Chemical

Chandra Asri Petrochemical

Source: Google map

128

2) Outlook (Without the project implemented)


The proposed project is designed to install a coal-fired generating capacity within the site of Anyer Plant owned
by Asahimas Chemical (ASC), a consolidated subsidiary of ASAHI Glass, in an effort to secure a power resource
that can contribute to solving Indonesias tightening electricity supply-demand balance.
Without this project, Asahimas Chemical would have no choice but to depend on PLNs electricity supply. In
macro terms, the efforts to introduce the generating capacity equivalent to the unrealized capacity (the projects
planned generating capacity: ASCs demand covered + surplus output supplied to PLN) should be made on PLN
side (including IPPs).11,12 However, such risks as cited below are worried when generating capacity introduction
is tried by developing new coal-fired power plants.
Development Risk
In Indonesia, site-acquisition troubles often cause delays to power plant construction projects. That is,
land acquisition can pose a crucial risk.
(In sharp contrast, the proposed project, to be built within the Anyer Plant site owned by ASC as already
mentioned, is completely free from such a site-acquisition risk. Moreover, the plant site and neighboring
coastal regions are situated in an area already established as an industrial zone, where few residents live.

In

other words, one of the superiorities inherent to the project is that it wont be bothered by any troubles arising
from residents moving, compensation talks, etc. because there are few residents whose office/living
environment would directly be affected by the project.)
Plant Operation-related Risk
Comparing PLNs commercial plant operation records with Japans in load factor terms, PLNs records
stay at around 80% compared with about 95% achieved by Japans (10 utilities total), which shows how to
secrure high load factor and good reliability is a matter of crucial importance.13

This is counted as a risk

involved in cost and stable electricity supply which requires PLN to take adequate response in its
generating capacity construction efforts.
Environmental Pollution (GHG emissions, air pollution, etc.) risk
Compared with coal-fired generating capacities developed in Indonesia so far (PLNs existing and planned
coal-fiered power plants as well as coal-fired generating capacities in general installed by various business
entities including in-house generators), the generating capacity to be introduced under the proposed project
11

Given the very tight electricity supply-demand balance of Java-Bali system today, power infrastructure construction is one of the
countrys top priorities. (See Chapter 1 (2) 4) a)<Reference: Java-Bali Systems Reserve Capacity in Recent Days>)
12
The newly-inaugurated Jocowi administration decided power development of 35,000MW to be done under its medium-term
development plan (2015~19), and publicly announced construction of additional power plants, chiefly coal-fired ones (on the ground
that coal-fired plants were found best in economics and price competitiveness).
13
All the coal-fired power plants being developed by PLN under the 1st CRASH Program (PLNs captive power plant construction
plan puts its total generated output at 10,000MW to be built by 2009, with only about 5,300MW completed as of 2014) are required
to use low-rank coals of under 4,500 kcal/kg in calorific value. No. 8 Unit at Sulalaya Power Plant, taken up in Chapter 3 (3) 5)
Case Study Information of Sulalaya Power Plant, was also built under the aforementioned plan. The No.8 Unit, a China-made
generating capacity of sub-critical type, reportedly suffers frequent ill-functions. In addition, while PLN has been introducing
circulatory fluidized bed (CFB) boilers, which permit direct combustion of low-rank coals, foreign-made CFB boilers employed by
PLN have proved poor performances so far, registering a rash of events, including frequent accidental outages and extremely low
utilization factors.
As the principal factors behind the miserable records, some point out that such troubles should often arise from careless designing,
where prudent cares were paid little to the construction, and operating & maintenance technologies actually in use, on top of the
problems related to equipment design and quality of selected equipment due to lack of concerns to seek best-matching ones to
physical properties of coals in use.

129

not only features excellent efficiency but also assumes to be opertated by taking adequate measures to meet
stringent environmental standards. That is, without the project, the opportunity of realizing its comparative
advantages should be lost.14

14

On the calculations of CO2 emissions, see the next section (2) Improved Environment by the Proposed Project.

130

(2) Improved Enviroment Expected from the Project


As environmental improvements associated with the implementation of the project, the target project (coal-fired
power generation: Case 1, Case 2) were compared and CO2 emissions are discharged, the CO2 emissions are
calculated from the emission factor of Indonesia of system power from.

1) Comparison of CO2 emissions per unit

a) Indonesian Grid
Average emission factor of 2013 in Indonesia of system power (emissions per unit), according to the power
supply plan of PLN (RUPTL) 2013-2022 (Abridged), a 766 g-CO2 / kWh. However, this value is the total power
mean value, because it is not a value of the coal-fired, can not be used for comparison.
On the other hand, according to the CO2 Emissions from Fuel Combustion of IEA (2013 Edition), CO2
emissions per unit of Indonesia's coal-fired of 2011 is 1,065 g-CO2 / kWh.

b) the target project (Case 1, Case 2)


By the following equation, we compared the CO2 emissions per unit of the subject project.
Annual coal consumption (t / year) = annual power generation amount of power (kWh / year) 860 (kcal /
kWh) thermal efficiency (%) coal calorific value (kcal / kg) 1,000 (kg / t)
Annual CO2 emissions (t-CO2 / year) = annual coal consumption (t / year) weight ratio of carbon content as a
percentage of coal CO2 and molecular weight ratio of carbon
The weight ratio of carbon content as a percentage of coal:

from the literature information (Source:

TEPCO design, as well as Adaro, Inc.: E5000 & E4000 spec sheet), 55% (Case 1: 5,000kcal / kg), 50%
(Case 2: 4,200kcal / kg).
CO2 and molecular weight ratio of carbon = 44/12
CO2 emissions per unit (g-CO2 / kWh) = annual CO2 emissions (g-CO2 / year) annual power generation
amount of power (kWh / year)

As a result, CO2 emissions per unit of the subject project, case 1 (600 000 kW, SC) at 856 g-CO2 / kWh, case 2
(450 000 kW, CFB) has been estimated at 988 g-CO2 / kWh in.
When you compare it to the value of a), CO2 emissions per unit of the target project, compared to coal-fired
average of Indonesia, case 1 with a 20% reduction, was calculated to be 7% reduction in case 2.

In addition to the reference, "life cycle CO2 emissions assessment of Japan's power generation technology,"
Central Research Institute of Electric Power Industry According to (2010), pulverized coal-fired power of Japan
(Sub-C, SC, USC) and CO2 emissions from fuel combustion of unit is a 887 g-CO2 / kWh.

2) annual CO2 emission reduction


From the above results, by paying attention to the case 1 CO2 reduction is carried out, it was estimated annual
CO2 emission reduction.

131

Annual CO2 emission reduction (t-CO2 / year) = average CO2 emissions per unit (t-CO2 / kWh) annual
amount of power generated target project of Indonesia coal-fired (kWh / year) - the target project (Case 1
annual CO2 emissions) (t-CO2 / year)

As a result, CO2 emission reductions due to the target project (case 1), 1,026,012 t-CO2 / year, ie has been
calculated to be about 1.03 million t-CO2 / year.

132

(3) Projects Impacts on Socio-Environmental Aspects


1) Items checked for socio-environmental reasons
In order to make an impact assessment of the project on socio-environmental aspects, and pick out the items to
be checked for socio-environmental reasons at the next stage of this FS works, checks were made in reference to
A Check List appearing on JAICs Environmental/Social Care Guidlines as well as A Check List provided
in JBICs Bank of International Cooperations Guidelines to Confirm Environmental/Social Cares.
Check results are summarized by category, which are shown in following sections of a~e. To sum up, the
results reveal that this project, so prudently designed as employing adequate measures to care the environment and
society, is least likely to have any grave loads on environment nor produce negative impacts on the society.

a) Permits/explanations

Tab.4-1 Checks on Permits/Explanations Involving Socio-Environmental Cares


Environmental Item

(1)EIA and
environmental
permits

Major Check Points

Check Results

(a) If preparation is over of environmental impact

(a),(b),(c): Implementation of EIA on the project is

assessment (EIA) report, etc.

scheduled. Besides, as the power plant planned by

(b) If host government approves EIA report, etc.

this project is slated to be built within the ANYER

(c) If incidental conditions accompany the

plant site owned by ASC, on which EIA/AMDAL

approval of EIA report, etc. If any, if such

were already made and approved, few problems are

conditions are satisfied.

likely in regard to siting.

(d) If required permits on environment other than

(d): No extra permits are required at present.

EIA, if any, already gained from local competent


government officies.
(a)On projects contents and impacts, if local

(a),(b): Not implemented yet, because the project

stakeholders understanding is gained by making

still remains at planning stage. But, as

to them adequate explanations, including

aforementioned, the site for this project is located

information disclosure.

within ASCs captive plant site, of which peripheral

(b)If comments from residents and others are

coastal areas are also well-developed industrial

reflected on projects content.

zone, opposition by local residents is unlikely.

(a) If a plural number of alternatives to the project

(a): At planning stage, examined is what will be

plan are under consideration (including

adopted as optimal technology (not only in

socio-environmental matters).

economics but in environmental terms) under

(2)Explanations to
local stakeholders

(3)Examinations of
options
restaints

Source: Study Team

133

b) Pollution control measures

Tab.4-2 Checks on Pollution Control Measures Involving Socio-Environmental Cares


Environmental
Major Check Points

Check Results

(a)If emissions of air pollutants, notably sulfur

(a),(b):With the project remaining at initial FS stage,

dioxide (Sox), nitrogen oxides (NOx) and dusts,

in-depth technology analysis is still under way, but it

resulting from the power plant operation can

is planned to introduce technologies to meet

meet the host countrys emission standards, and

emission standards (ex. electrostatic precipitator to

if such emissions make any area unable to meet

remove dusts, flue-gas desulfurizor to cut Sox

the host countrys standards.

emissions, and Low-NOx burner/Two- Stage

(b) In case of coal-fired power plant, if air

Combustion system to slash NOx emissions).

pollution attributable to scattering coal dusts

(b): Coals used as fule are stored at coal stockyard

from coal stockyard and particulate matters from

after forwarded from unloading berth via conveyer.

coal ash treatment yard is worried. If measures

Dust scattering will be controlled by taking every

are taken to mitigate such pollution.

possible measure (ex. encloused conveyer, water

Items

(1) Air quality

spraying).

(a) If effluents from power plant, including

(a),(b),(c): With the project remaining at initial FS

heated ones, can meet the host countrys water

stage, in-depth technology analysis is still under

quality standards, and if such discharge makes

way, but it is planned to employ of technologies to

any area unable to meet the host countrys

meet water quality standards.

standards and/or creates high-temperature water

(b),(c): On ash pond to dump coal ash, it is planne to

zones

employ adequate measures to prevent immersing

(b) In case of coal-fired power plant, if water

liquids, if any, from contaminating public waters.

immersing from coal stockyard and coal ash

(c): On any other effluents from power plant, it is

treatment yard can be acceptable under the host

planned to install waste water treatment

countrys standards

equipment/systems capable of offering adequate

(c) If measures are taken to prevent such

treatment pursuant to specific standards.

(2)Water quality

effluents from contaminating surface waters,


soils/underground water, oceans, etc.

(a) If wastes resulting from plant operation

(a): With the project remaining at initial FS stage,

(waste oil, waste chemicals) and such other

in-depth examination is still under way, but it is

wastes as coal ash and by-product gypsum from

planned to practice waste treatment/disposal

flue-gas desulfurization are adequately treated

pursuant to specified rules.

(3)Wastes
or disposed of.

(4)Noize/vibration

(a) If noise and vibration can meet the host

134

(a): With the project remaining at initial FS stage,

Environmental
Major Check Points

Check Results

Items
countrys standards.

in-depth examination is not made yet, but it is


planned to meet environmental standards along the
boundary of the site (by conducting environmental
monitoring along the boundary, which is legally
requied, and taking standard measures widely in use,
such as introduction of soundproof/sound-silencer
equipment and installation of soundproof walls
along the boundary).
Meanwhile, as aforementioned, the site for this
project is located within ASCs captive plant site, of
which peripheral coastal areas are also
well-developed industrial zone, noise and vibration
that can cause grave damages to nearby residential
areas appears least likely.

(a) In case groundwater is pumped up in huge


quantities, if land subsidence is feared.
(5)Land subsidence

(a):No problem, because seawater is used as cooling


water.

On utility water either, fears for land

subsidence are absent because the use of service


water is under consideration.

(a) If there are odor sources.


(6)Odor

If any, are there

(a): Few odor sources are found in this project.

any measures taken to prevent ordor?

Source: Study Team

135

c) Natural environment

Tab.4-3 Checks on Natural Environment Involving Socio-Environmental Cares


Environmental
Major Check Points

Check Results

Items
(a) If the site is located with any reserve

(a):The site is not located in any reserve specified by

specified by the host countrys laws and/or

the host countrys laws,

international accords, etc.

international accords, etc.

If it is, if the project

has some impact on the reserve.


(1)Reserves

(a) If the site includes virgin forests, tropical

(a): The planned site for this project does not include

natural forests and/or important habitats in

any of the areas cited left.

ecological terms (ex. coral reefs, mangrove

(b): The planned site for this project does not include

swamps, dry beach).

habitats of any scarce speices.

(b) If the site includes habitats of scare spieces of

(c): With any habitats of scarce speices absent, no

which preservation is called for under the host

grave impacts are anticipated.

countrys laws, international accords, etc.

(d),(e): With the project remaining at initial FS

(c) In case grave impacts on ecological system

stage, in-depth examination is not made yet, but it is

are feared, if measures are taken to mitigate such

planned to employ, at the stage of detailed design,

impact on ecology

necessary measures identified after checking what

(d) If intake (surface water, underground water)

must be done.

(2)Ecological
system
for the project produces impacts on water
environment, typically rivers.

If measures are

taken to mitigate impacts on acuatic life.


(e) If discharge of heated waste water, intake of
cooling water in large quantities and/or discharge
of immersed water can have adverse effects on
ecological system in peripheral waters.

Source: Study Team

136

d) Social environment

Tab.4-4 Checks on Social Environment Involving Socio-Environmental Cares


Environmental
Major Check Points

Check Results

Items
(a) If the implementation of the project causes

(a),(b),(c),(d),(e),(f),(g),(h),(i),(j): This project

non-spontaneous moving of residents.

wont cause residents moving.

If so,

efforts are made to minimize effects of moving.


(b) If adequate explanations are made to affected
residents on compensation/living restoring
supports before their moving
(c) With research on residents moving made, if
moving can be well-planned for covering
conpensation-depending housing price and
restoration of living basis.
(d) If compensation is paid prior to moving.
(e)If compensation policy is prepared in written
(1)Moving of
forms
residents
(f) If the plan is made byextending adequate cares
to the social weak, such as women, children, the
aged, the poor, minorities/native trribes among
the moving residents
(g) If agreement is gained from affected residents
before their moving
(h) If system is well-prepared for adequately
implementing residents moving
(i) If monitoring is planned for learning impacts
of moving
(j) If mechanism is constructed for dealing with
claims
(a) If project has adverse effects on residents

(a): As aforementioned, the site for this project is

living.

located within ASCs captive plant site, of which

If cares are taken to mitigate such effects

when necessary.

peripheral coastal areas are also well-developed

(b) If social infrastructure, required for

industrial zone, significant impacts on nearby

implementing the project is sufficient (ex,

residential areas are unlikely.

hospital, school, road).

(b): Because environs of the project site have been

(2) Life/living
If insufficient, any plan

is made for such infrastructure construction.

developed as an industrial district, social instructure

(c) If large trucks and other vehicles in service for

are well installed by and large.

the project can affect peripheral road traffic

(c),(d): With the project remaining at initial FS

conditions. If cares are taken to mitigate effects

stage, in-depth examination is not made yet, but, at

137

Environmental
Major Check Points

Check Results

Items
on traffics when necessary.

detailed design stage, necessary measures are taken

(d) If inflows of workers, etc. for projects works

after checking what are needed.

have a danger of epidemics (incl. such infections

(e): With the project remaining at initial FS stage,

as HIV).

in-depth technology analysis is still under way, but,

If adequate cares are taken for public

hygienic reasons when necessary.

because technology to meet water quality standards

(e) If intake (surface water, underground water)

is introduced as a matter of course, effects on

and discharge of heated waste water of the project

existing water use and use of waters will be limited.

can have impacts on existing water use and use of


waters (particularly fishing industry).
(a) If the project is feared to damage heritage,

(a): The left is not applicable to the project.

historical spots and the like which are precious in


(3) Cultural heritage

archaeological, historical and/or religious terms


and, also, if measures specified under the host
countrys domestic laws are taken into account.
(a) In case landscape worthy for special cares is

(4)Landscape

(a): The left is not applicable to the project.

present, if the project can have adverse effects on


it.

If it can, if necessary measure are taken.

(a) If cares are taken to mitigate effects on culture

(a),(b): The left is not applicable to the project.

and living style of minorities and native tribes in


(5) Minorities,
the host country.
native tribes
(b) If rights of land and resources rendered to
minorities and native tribes are respected.
(a) If the host countrys laws on working

(a),(b),(c),(d): : With the project remaining at initial

environment are observed in the project.

FS stage, in-depth examination is not made yet, but,

(b) If cares are taken for safety of project staffs in

at detail design stage, as a matter of course,

hardware terms, including installation of safety

necessary measures are taken after checking what

equipment to prevent working disasters and

are needed.

management of hazardous materials.


(c) Including preparation of safety/health plan and
(6) Working

workers safety education (incl. traffic safety and

environment
public health), if response measures are
planned/implemented for project staffs in
software terms.
(d) If adequate measures are taken so that
guardmen involved in the project should not
infringe safety of project staffs and local
residents.

Source: Study Team


138

e) Others

Tab.4-5 Checks on Other Items Involving Socio-Environmental Cares


Environmental
Major Check Points

Check Results

Items
(a) If measures are prepared to mitigate pollution

(a),(b),(c): With the project remaining at initial FS

during construction works (ex. noise, vibrations,

stage, in-depth examination is not made yet, but, at

contaminated water, dusts, flue gas, wastes).

detailed design stage, adequate measures are

(b) If construction works can have adverse

naturally taken to mitigate effects of construction

effects on natural environment (ecological

works, if any.

(1)Influence of
system) and, also, if measures are prepared for
construction works
mitigating such effects.
(c) If construction works can have adverse
effects onsocial environment and, also, if
measures are prepared for mitigating such
effects.
(a) In case of coal-fired power plant, if plan is

(a): With the project remaining at initial FS stage,

(2)Accident-

made for preventing spontaneous ignition at

in-depth technology analysis is still under way, but,

preventive measure

coal stockyard (ex. water-spraying system)

it is planned to introduce technology/equipment


required for taking necessary measures.

(3)Monitoring

(a) If operators monitoring is planned and

(a),(b),(c),(d): With the project remaining at initial

implemented on the environmental matters likely

FS stage, in-depth examination is not made yet, but,

to produce some effects out of those cited above.

at detailed design stage, while reporting made with

(b) How the items, methods, frequencies, etc. of

the method and frequencies regulated, monitoring

such monitoring plans are decided.

system (ex. organization, staffs, equipment, budgets,

(c) If operators monitoring system (ex.

continuity of these) will be established.

organization, staffs, equipment, budgets,


continuity of these) is established.
(d) If reporting forms, frequencies, etc. from the
operator to competent government offices and
others are regulated.

(4)Others

(a)If quality standards for coals are set.

(a),(b):In parallel with examination of candidate

(b)If generating capacity is planned by taking

technologies, plan is made on coals in use by

coal quality into account.

selecting coal qualities and checking/confirming


availability of their procurement (both currently
under way).

Source: Study Team

139

2) Examinations of the project compared with other options


Among the options to secure power resources for any consumers in and around the site under discussion, those
cited below are viable and worthy for examination.
To depend on PLN.
To build new coal-fired power generating capacity.

As already mentioned, compared with coal-fired power generating capacity currently available in Indonesia
(PLNs existing coal-fired power plants and other coal-fired power plants of various types planned generally by
any other projects), the power plant designed under this project will be equipped with highly efficient facilities
which are environment-benign thanks to a host of advanced eco-systems, each capable of offering adequate
measures to meet stringent environmental standards. In this sense, if the former option is taken, a strong
likelihood is that the country will loose a big chance to realize such comparative advantages inherent to this
project. Moreover, as aforementioned, the site slated for this project is located within ASCs captive plant site, of
which peripheral coastal areas are already well-developed as industrial districts, whereby opposition by local
residents (due to such problems as their affected occupational/living environment and land expropriation troubles)
is least likely to pose serious impediments. And yet, construction of coal-fired power plants in this country can
be counted as risk-ridden by nature as depicted above.

As for the latter option, this project is proposed only after meticulous efforts with which a host of candidate
technologies were put to examination in hopes to identify optimal one under the constraints in this country and, in
that process of examination, a plural number of options were put to comparison in order to evaluate their
merits/demerits from various angles including their likely impacts on environment.15

From now on, at the stage

of detailed design, careful examination is planned to learn what impacts can be produced on environment by each
of the component technologies adopted in this project because of their characteristics, which are found
outstanding essentially.

3) Outcome of information gathering on socio-environmental impacts


During this FS works, an interview survey was made to the Bureau of Environment, Cilegon City, responsible
for environment impact assessment (EIA), from which following comments were provided.
On the project proposed, under which construction is planned within the site of ANYER plant owned by
ASC, the project appears to have few problems in terms of EIA-related general requirementsn, in part
because EIA on the site has already been made (though the project is naturally required to make an EIA of
its own).

For instance, problems are noted little in regard to likely impacts on reserves, local residents,

among others.

15

See Chapter 3 Projects Contents and Examinations of Technological Aspect.

140

(4) Outline of Host Countrys Laws Related to Socio-environmental Cares


and Essential Measures Required for Observance
1) Outline of socio-environmental cares-related laws involved in project implementation

a) Environmental management and environmental impact assessment


In Indonesia environmental impact assessment system (AMDAL standing for Analisis Menganai Dampak
Lingkungan in the Indonesian language) was introduced in 1986. Later, in 1993, under the Ordinance No. 51
on Environmental Impact Assessment of 1993, the system was drastically vamped, which chiefly included
streamlining the initial screening process and empowering a stronger authority to the Agency of Environmental
Impact Management on the project reviews in which a plural number of government officies were involved. In
1997, with the Law on Environmental Management enacted, the laws on environment were legally systematized.
Furethermore, in 2006 related guidelines were promulgated, and the Law on Environmental Management was
drastically amended. In 2012, when an environment license acquisition system was introduced, AMDAL was
amended as well (Ordinance No 27 of 2012). On the types and scales of projects and/or activities subject to EIA
are stipulated under the Environment Minister Regulation (No. 5 of 2012).

Tab.4-6

Major Laws on Environmental Management and EIA

Category

Laws and the Like

Basic law

Law on Environmental Management (Law No. 32 of 2009)16

Ordinance

Ordinance on Environmental License (Ord. No. 27 of 2012)17

Presidential decree

Presidential Decreeon Environment Management Agency (P.D. No. 77 of 1994)


Environment Ministrs Ordinance on Environment License Guidelines (No. 17 of 2012)
Environment Ministrs Ordinance on Types of Projects and Activities Subject to EIA
(No. 11 of 2006)
Environment Ministrs Ordinance on Types of Projects and Activities Required to Make
EIA (NO.KEP-11/MENLH/3/1994)
Environment Ministrs Ordinance on the General Guidelines on Environment
Management

Procedures

and

Environment

Monitoring

Procedures

(NO.KEP-12/MENLH/3/1994)
Ministerial ordinance

Environment Ministrs Ordinance on the Guidelines on Formation of the Environment


Impact Assessment Committee and

Its Management (NO.KEP-13/MENLH/3/1994)

Environment Ministrs Ordinance on the Guidelines on Environment Impact Assessment


(No.2 of 2000)
Environment Ministrs Ordinance on the Residents Involvement in EIA Process and
Information Disclosure (No. 8 of 2000)
Environment Ministrs Ordinance on the Guidelines on EIA Preparation (No. 9 of 2000)
Environment Ministrs Ordinance on the Guidelines on the Working System of the
Committee Responsible for Reviewing EIA Reports (No. 40 of 2000)

Source: Study Team based on The Ministry of Environment Various Materials on Indonesias AMDAL Laws,
materials furnished by Indonesias Environment Ministry, the EIA Div.
16

Enforced under the Law No. 4 of 1982, and drastically amended under the Law No. 23 of 1997. Amended in 2009, and the
resultant Law as amended was promulgated and enforced on October 3.
17
No. 51 of 1993, replaced by No. 27 of 1999 as amended, and by No. 27 of 2012 as amended.

141

b) Space planning
In Indonesia, space-planning laws has been prepared on the use and development of the countrys territorial
space. The first of the laws of this type weres the Presidential Decrees set forth in the 1980s, followed by the
enactment of the basic law entitled the Law No. 26 on Space Planning of 2007. Pursuant to the basic law and
its relevant laws and regulations, notably ministerial ordinances and presidential decrees, the national and local
governments (state and city/county) are preparing their basic plans for space utilization/development in their
juristictions, based on which they commit to zoning of reserves and development areas by purpose. Siting of
coal-fired power plant is also required to be coherent to space planning of the affected area, which is counted as an
essential precondition for AMDAL and issuane of environmental permits.

Tab.4-7

Major Laws on Space Planning

Category

Laws

Basic law

Law on Space Planning (No. 26 of 2007)

Ordinances

Ordinance on National Space Planning (No. 26 of 2008)


Ordinance on the Communitys Rights and Duties to Participate in Space Planning as
well as Its Forms and Procedures (No. 69 of 1966)

Presidential decree

Presidential Decree on the Coorination Team Devoted to the Management of Nations


Territorial Space (No. 57 of 1989)
Presidential Decree on the Management of Reserves (No. 32 of 1990)

Source: Study Team based on The Ministry of Environment Various Materials on Indonesias AMDAL Laws,
materials furnished by Indonesias Environment Ministry, the EIA Div.

c) Major laws on environmental measures/stndards


Focusing on coal-fired power plant projects, the section extracts and summarizes major laws which specify
environmental measures/standards important for such projects.
Under the Law on Local Administration of 1999 (Law No. 22) paired with the Law on the National and Local
Fiscal Balancing, extensive power decentralization has been driven forward from 2001 and on. Responsibilities
for environmental management, including air and water pollution, have been transferred to state and city
governments.

Tab.4-8

Major Laws on Environmental Measures/Standards Related to Coal-fire Power Projects

Field
Air quality

Laws
Ordinance on the Prevention of Air Pollution (Ord. No. 41 of 1999) 18
Environment Ministrs Ordinance on Air Pollution Indicators (No. 45 of 1997)
Environment Ministrs Regulation on the Standards of Flue Gas from Fixed-Source
Boilers (No. 7 of 2007)
Environment Ministrs Regulation on the Standards of Flue Gas from Fossil Fuels-fired
Power Plants (No. 21 of 2008)

18

In 1993 the guidelines on the prevention of air pollution under the Environment Ministrys jurisdiction were specified by a
ministerial ordinance, based on which environmental standards are set.

142

Field

Laws
Environment Ministrs Regulation on the Implementation of Preventive Efforts for
Local Air Pollution (No. 12 of 2010)

Water quality

Ordinance on Water Management and the Prevention of Water Quality Pollution (No.
82 of 2001)19
Ordinance on the Prvention of Marine Pollution and Destruction (No. 19 of 1999)
Environment Ministrs Ordinance on the Standards of Industrial Effluents (No. 51 of
1995, No. 122 of 2004 as amended thereof)
Environment Ministrs Ordinance on the Guidelines on the Determination

of Water

Quality-polluting Loads on Water Resources (No. 110 of 2003)


Environment Ministrs Ordinance on Water Quality Standards for Seawater (No. 51 of
2004, No. 179 of 2004 as amended thereof)
Environment Ministrs Ordinance on the Standards of Effluents from Coal Mining and
Its Associated Operations (No. 113 of 2003)
Environment Ministrs Regulation on the Effluents from Fossil Fuels-fired Power
Plants (No. 8 of 2009)
Noise/vibration

Environment Ministrs Ordinance on Environmental Standards of Noise (No. 48 of


1996)
Environment Ministrs Ordinance on Environmental Standards of Vibration (No. 49 of
1996)

Odor

Environment Ministrs Ordinance on Environmental Standards of Odor (No. 50 of


1996)

Wastes

Law on Waste Management (No. 18 of 2008)

Source: Study Team based on The Ministry of Environment Various Materials on Indonesias AMDAL Laws,
materials furnished by Indonesias Environment Ministry, the EIA Div.

19

Relevant guidelines were specified by a ministerial ordinance, based on which environmental standards are set.

143

d) Emission standards applicable to fossil fuels-fired power plants


Presented below are the emission standards of pollutants (flue gas, effluents) from fossil-fueled power plants,
which are provided by the laws cited in the preceding section.20
Flue gas standards
Tab.4-9

Flue Gas Standards for Fossil-fueled Plants (equipped with 24-hour monitoring system)
Max. allowance (mg/Nm3)

Index
Coal

Oil

Gas

750

650

50

750

450

320

Particulate matters (TP)

100

100

30

Opacity

20%

20%

Sulfur dioxide (SO2)

21

Nitrogen oxides (NOx) as an indicator


23

22

Source: Environment Ministrs Ordinance on the Standards of Flue Gas Standards from Fossil Fuelsfired Power Plants No. 21 of 2008 (Appendix 1B)
Effluents standards
Tab.4-10 Effluent Standards for Fossil-fueled Plants CPU (Centra lProcessing Unit for effluents)
Index

Unit

Allowance

6-9

Total suspending particulates (TSP)

mg/L

100

Oils and fats

mg/L

10

mg/L

0.5

mg/L

0.5

Copper (Cu)

mg/L

Ferrous (Fe)

mg/L

mg/L

mg/L

10

pH

Free chlorine (Cl2)

Total chromium (Cr)

Zinc (Zn)
4-

Phosporous (PO )
1

When cooling tower blow Down flows through the liquid waste treatment ground ,

When I inject phosphoric acid

Source: Environment Ministrs Ordinance No. 8 of 2009 (Appendix 1)

20

The Ordinance of the Prevention of Air Pollution (No. 41 of 1999) set forth air quality standards for 13 matters. The Environment
Ministers Ordinance (No. 45 of 1997) introduced pollution standard indexes. Also, the Ordinance on Water Management and the
Prevention of Water Quality Pollution (No. 82 of 2001) stipulated environmental standards of fresh water which are grouped into
four types by use, while water quality standards for seawater is regulated under the Environment Ministers Ordinances (Nos. 51
and 179 of 2004). The standards of effluents originating from fossil-fueled power plants are provided by the Environment
Ministers Regulation (No. 8 of 2009).
21
Gaseous volume is measured under standard conditions (atmospheric temperature at 25.0, atmospheric pressure 1 atm.)
22
Opacity is employed as a practical monitoring index.
23
On all allowances, it is required to achieve 95% of the specified levels at least within 3 days.

144

Tab.4-11 Effluent Standards for Fossil-fueled Plants Boilers


Index

Unit

Allowance

6-9

Copper(Cu)

mg/L

Ferrous (Fe)

mg/L

pH

Source: Environment Ministrs Ordinance No. 8 of 2009 (Appendix 1)


Tab.4-12 Effluent Standards for Fossil-fueled Plants Cooling Towers
Index

Unit

Allowance

6-9

mg/L

mg/L

mg/L

10

pH
Free chlorine (Cl2)

Zinc (Zn)
PO

When cooling tower blow Down does not flow through the liquid waste treatment ground

Source: Environment Ministrs Ordinance No. 8 of 2009 (Appendix 1)


Tab.4-13 Desalinated Effluent Standards for Fossil-fueled Plants Effluent Treatment Plants
Index

Unit

Allowance

6-9

mg/L

100

pH
Total suspending particulates(TSP)

Source: Environment Ministrs Ordinance No. 8 of 2009 (Appendix 1)


Discharged cooling water standards (incidental facility)
Tab.4-14

Standards of Discharged Cooling Water from Fossil-fueled Plants

Index

Unit

Water temperature
Free chlorine (Cl2)
1

mg/L

Result of a measurement of the moon average in the drainage exit ,

Allowance
40

0.3

When a water source of supply does not flow through the liquid waste treatment ground

Source: Environment Ministrs Ordinance No. 8 of 2009 (Appendix 2)

Tab.4-15

Standards of Desalinated Water Discharged from Fossil-fueled Plants

Index
pH
Salinity concentrations

Unit

Allowance

6-9

Salinity concentrations of the effluents should


become identical to that of seawater within
30m distant from the discharged point.

When desalination processing waste water does not flow through the processing ground

Source: Environment Ministrs Ordinance No. 8 of 2009 (Appendix 3)

145

Tab.4-16

Standards of Effluents from Flue-gas Desulfurization System


(Seawater-based Wet Type Scrubber) from Fossil-fueled Plants

Index

Unit

Allowance

6-9

Incremental sulfate should be under 4%

pH
(2-)

SO4

compared with sulfate concentrations of raw


water (seawater).

When the drainage of the seawater wet process scrubber system is not called off in the processing ground

Source: Environment Ministrs Ordinance No. 8 of 2009 (Appendix 2)


Effluents standards (coal stockyards)

Tab.4-17 Effluents Standards for Coal Stockyards


Index

Unit

Allowance

6-9

Total suspending particulates (TSP)

mg/L

200

Ferrous

mg/L

Manganese

mg/L

pH

Source: Environment Ministrs Ordinance No. 8 of 2009 (Appendix 2)


Effluents standards (oil contents)
Tab.4-18
Index

Standards of Waste-oil-containing Effluents


Unit

Allowance

mg/L

300

Total suspending particulates (TSP))

mg/L

110

Oils

mg/L

COD

15

When waste water containing oils does not flow through the processing ground

Source: Environment Ministrs Ordinance No. 8 of 2009 (Appendix 3)


2) EIAs Contents and others required by the host country before project implementation
To start a project in Indonesia, an Environmental Impact Assessment (EIA; AMDAL) must be made so as to
demonstrate principal environmental requirements are cleared. The power to implement environmental impact
assessment is endowed to the government office having the jurisdiction over the project, of the first-class local
government, while the Environmental Management Agency is expected to act as a coordinator overall.24

a) Applications/approvals
The power to implement environment impact assessment is endowed to the central governments ministry
having the jurisdiction over the project, as well as the state governments and special administrative districts across
the country, with each institution concerned expected to form its own Environmental Asseessment Committee
24

The proposed project is under the jurisdiction of Cilegon City.

146

which is responsible for prior screening and reviews on the contents of EIA reports. Of them, the Central
Committee for Environmental Impact Assessment set at the national government level is chaired by the head of
the ministry having the jurisdiction over the project, while the committees at the local level are presided by state
governors. These EIA committees are two-tiered in general and consist of a standing committee and a
non-standing committee, with the former participated by the representatives of competent administrative
organizations, experts on environmental issues and environmental groups, and the latter by the representatives of
citizens two. The flow of application and permits is summarized below.
Screening
The entity which plans or implements a project files a project plan to the office having the jurisdiction thereof,
where it is put to screening to determine if environment impact assessment needs to be made on the planned
project (on which judgment/decision by the EIA committee is made within 30 days at latest).25
Scoping
In case the need for EIA implementation is decided, the project entity is required to submit AMDAL research
specifications (TOR) and implementation plan (KA-ANDAL), which are reviewed by local administrative staff in
charge within 30 days at latest.26
Approval of AMDAL
Continuing from the above, the project entity is required to prepare and submit an EIA report (ANDAL) and a
planning documents for environmental management plan and environmental monitoring plan (RKLRPL). On
these, the EIA committee judges/determines their compatibility to the prescribed requirements within 75 days at
latest. (When found compatible) the project can be approved by either the Environment Minister or the
Governor concerned.

b) Organization of AMDAL documents


The environmental report consists of following documents:
EIA Implementation Plan
Terms of Reference (Kerangka Acuan/KA ANDAL)
Environmental Impact Assessment (ANDAL)
Environmental Impact Analysis (Analisis Dampak Lingkungan/ANDAL)
Environmental Management Plan (RKL)
Environmental Management Plan(Rencana Pengelolaan Lingkungan Hidup /RKL)
Environmental Monitoring Plan (RPL)
Environmental Management Plan(Rencana Pemantauan Lingkungan Hidup /RPL)

25

Screening is made in pursuant to the list specified by the Environment Ministrys Ordinance No.3 of 2000 (amended by Ministrys
Ord. No.12 of 2001 and No. 11 of 2006). Under the law, the project entity isrequired, after screening, to prepare EIA research
spesifications (TOR) (scoping). Also, in 2012, an environmental license acquisition system was introduced and AMDAL was
amended as well (Ord. No. 27 of 2012), with which EIA procedures must comply.
26On the review process, conventional rules, stating that EIA Committee shall make the revies within 75 days at latest, was
streamlined by amendment of AMDAL in 2012 (Ord. No.27 of 2012).

147

(5) Vital Matters to Be Done by the Concerned Entities in the Host


Country for Successful Project
In order to carry out the proposed project in Indonesia it is required first to make an environmental impact
assessement so as to demonstrate the project can satisfy all of chief requirements of the country. While Cilegon
City, having the jurisdiction over the proposed project, is empowered to implement EIA on the project, it is
essential to obtain relevant permits by swiftly taking necessary application/approval procedures.

148

Chapter5
Financial and Economic Evaluation

(1) Integration of project costs


1Construction costs (design, procurement, construction works: EPC)
Based on the power plants system configuration (Case 1, Case 2) discussed in Chapter 3, and in referrence to
the cases of cost design done for existing power plants (SC, CFB), the construction costs incurring in the two
cases were added up. The results are shown in Table 5-1 and Table 5-2.

Tab.5- 1 Construction Costs (Case 1: SC 600,000 kW x a unit)

Roughly estimated cost


Item

In dollars
(US$ Mil.)

In Rupiah (Bil. Rp)

Total (US$ Mil.)

Boilers and environmental systems

197.8

439.9

232.8

Steam turbines and generators

130.1

289.3

153.1

47.4

105.4

55.8

Coal conveyor and ash treatment


systems

Electric/control equipment

36.6

81.4

43.0

Other incidental equipment

55.6

123.5

65.4

Civil engineering/installation works

77.9

173.3

91.7

Sub-total

545.5

1,212.8

641.7

54.5

121.3

64.2

600.0

1,334.1

705.9

Contingency (10% of sub-total)

Total

Exchange rate: US$1Rp.12,600

Tab.5- 2 Construction Costs (Case 2: CFB 150,000 kW x 3 units)

Roughly estimated cost


Item

In dollars
(US$ Mil.)

In Rupiah (Bil. Rp)

Total (US$ Mil.)

Boilers and environmental systems

132.0

482.9

170.3

Steam turbines and generators

86.8

317.6

112.0

31.6

115.7

40.8

Coal conveyor and ash treatment


systems

Electric/control equipment

24.4

89.3

31.5

Other incidental equipment

37.1

135.6

47.8

Civil engineering/installation works

34.2

125.1

44.1

Sub-total

346.1

1,266.2

446.6

34.6

126.6

44.7

380.7

1,392.8

491.3

8
9

Contingency (10% of sub-total)


Total

Exchange rate: US$1Rp 12,600

152

2Initial investment cost


The costs below were counted as initial investment cost.
a) EPC cost mentioned above.
b) Cost to install additional substation to interconnect to 150kV-transmission line.
c) Sundry costs incurring in finance arrangement and permit-acquisition
d) Interest accruing during construction of power plant, substation and transmission line (interest taken into
the principal)

Interest during construction was calculated on the assumption that a lump-sum loan (Case 1: 71.7% of the total
cost, Case 2: 59.3% thereof) would be provided in the first year of the construction period (3.0 years) under the
terms below.
JBIC investment finance:
Annual interest rate: Standard interest rate (LIBOR: US$, 6 months) 0.3768% + risk premium 5.0%* =
5.3768%
(*Note: Risk premium will be actually decided after evaluation in each individual case, here for the IIR
estimates, based on hearing results from the JBIC, was set here as 5.0%.)
Term of repayment: 15 years
Term of grace: 3 years
Repayment method: Principal paid back in equal installments
Others:
Annual interest: 8.00% (provisionally assumed)
Term of repayment: 15 years
Term of grace: 3 years
Repayment method: Principal paid back in equal installments

Tab.5- 3

Initial Investment Cost (Case 1)

Roughly estimated cost


Item

In dollars

In Rupiah (Rp. Bil.)

Total(US$Mil.)

600.0

1,334.1

705.9

US$ Mil.
1

EPC cost (see Tables 5-1, 5-2)

Substation (additional)

1.5

18.9

3.0

Sundry cost1+2=5%

30.1

67.7

35.4

Interest during construction

93.4

0.0

93.4

725.0

1,420.7

837.8

Total

US$1Rupia 12,600

153

Tab.5- 4

Initial Investment Cost (Case 2)

Roughly estimated cost


Item

In dollars

In Rupiah (Rp. Bil.)

US$ Mil.
1

EPC cost (see Tables 5-1, 5-2)

In dollars
US$ Mil.

380.7

1,392.8

491.3

Substation (additional)

1.5

18.9

3.0

Sundry cost1+2=5%

19.1

70.6

24.7

Interest during construction

53.8

0.0

53.8

455.2

1,482.3

572.8

Total

US$1Rupia 12,600

3) Running costs
The costs below were counted as running costs.
a) Cost incurring in operation and maintenance
b) Cost to purchase coals used as fuels
Annual coal requirements estimated in Chapter 3 x unit price of coals
Unit price of coals:
Based on the table A Data List by Calorific Value and by Brand presented in Chapter 3, the unit
prices below were employed as the representative ones.
Case 15,000kcal/kg 57.65 US$/t
Case 24,200kcal/kg 35.00 US$/t
c) Land costs: With construction site already available, no additional costs, incl. rent.
d) Various premiums: Included in the operation/maintenance cost.
e) Interest payment: Annual interest paid when paid back under the terms shown in 2).
f) Corporate tax rate: 25%

Tab.5- 5 Running Costs (Case 1)

Roughly estimated cost


Item

In dollars
US$ Mil.

In Rupiah (Rp. Bil.)

In dollars
US$ Mil.

Operation/maintenance

8.1

204.5

24.3

Fuel

0.0

1,517.8

120.5

Land

0.0

0.0

0.0

Premiums

Include in 1

Include in 1

Include in 1

Interest payment

5.38%/8.00%

0.0

5.38%/8.00%

Corporate tax

0.0

25%

25%
US$1Rupia 12,600

154

Tab.5- 6 Running Costs (Case 2)

Roughly estimated cost


Item

In dollars
US$ Mil.

In Rupiah (Rp. Bil.)

In dollars
US$ Mil.

Operation/maintenance

5.6

142.3

16.9

Fuel

0.0

886.2

70.3

Land

0.0

0.0

0.0

Premiums

Include in 1

Include in 1

Include in 1

Interest payment

5.38%/8.00%

0.0

5.38%/8.00%

Corporate tax

0.0

25%

25%
US$1Rupia 12,600

155

(2) Major Results of Preliminary Financial/Economic Analysis


1Financial internal rate of returns (FIRR)
FIRR (financial internal rate of returns) was calculated based on the preconditions below.
The selling prices of electricity were set as follows.
The price of electricity sold from PPU (SPC) to PLN
Set at set 656 Rp/kWh based on Article 2 of the Energy and Mineral Resources Ministrys
Ordinance No. 4 of 2012, Ordinance on PLNs Purchase Price for Renewables-based or Surplus
Output from Small/Medium Resources.
However, given that the purchase price is actually settled by bilateral negotiations with PLN, a
strong likelihood is that a much higher price can be settled by such negotiations. Accordingly, the
price set above is a provisional value for the purpose of IPP calculation as of now.
The price of electricity sold from PPU (SPC) to ASC
Set at set 656 Rp/kWh as in the case above.
However, the selling price is actually settled by bilateral negotiations between SPC and ASC, with
an endorsement of Cilegon City. Meanwhile, when interviewed, Cilegon City answered that the
City wont care even if the price would be set much lower than the selling price tyo PLN. The
price set above is a provisional value for the purpose of IPP calculation as of now.
Annual running hours was set at 8,200 hours (Annual total hours 8,760 hrs. periodical inspection 560
hrs.)
Generating efficiency (thermal efficiency) was set at 40.5% (Case 1: SC) and 37.6% (Case 2: CFB), and
falling output and deteriorating efficiency should be unlikely with continuous efforts for adequate
maintenance.
In-house consumption at the power plant was set at 25,000 kW8,200hrs/y.
Calorific values of coals used as fuel were set at 5,000kcal/kg (Case 1) and 4,200kcal/kg (Case 2), the
coal prices assumed at 57.65 US$/t (Case 1) and 35.00 US$/t (Case 2), respectively.
The rate of inflation, set at 2.39%, a median of the last 10 years in the U.S., taken because the cost was
calculated in US dollars, was reflected on returns and running costs from the second year and on after
plant operation started.
Given the 3-year construction period, plant operation and loan repayment was assumed to start from the
fourth year and on.
Depreciation was assumed to be made with the straight line method, no scrap value, and 40-year
depreciation period.
The period of plant operation was assumed to be 40 years, identical to the depreciation period.
Of the funds raised, the ratios between capital contributions and loans were assumed to be 28.3%: 71.7%
(Case 1), 40.7%:59.3% (Case 2).

156

Calculation results of FIRR are shown in Tables 5-7 and 5-8.


FIRR was estimated at 11.5% for Case1, and at 14.3% for Case 2.
Given that these outvalue Indonesias long-term interest rate (10-year national bonds yields) (7~9%) in the last
12 months, this project is considered highly feasible in financial terms on the assumption of the conditions
described above.

Tab.5- 7

FIRR Caluculation Results (Case 1)


Unit: US$Mil.

Investme

Return

Running

Principal & interest paid

Depreciati

Pre-tax

After-tax

Cash

profit

flow

8=6-7

9=8+5+4-1

Tax

Yea
nt

cost

back

on

profit

6=2-3-4-5

r
7

279.26

-279.26

279.26

-279.26

279.26

-279.26

245.48

144.80

53.63

20.94

26.10

6.53

19.58

94.15

251.35

148.26

53.63

20.94

28.51

7.13

21.38

95.96

257.35

151.80

53.63

20.94

30.97

7.74

23.23

97.81

263.50

155.43

53.63

20.94

33.50

8.37

25.12

99.70

269.80

159.15

53.63

20.94

36.08

9.02

27.06

101.64

276.25

162.95

53.63

20.94

38.72

9.68

29.04

103.62

10

282.85

166.84

53.63

20.94

41.43

10.36

31.07

105.65

11

289.61

170.83

53.63

20.94

44.20

11.05

33.15

107.73

12

296.53

174.91

53.63

20.94

47.04

11.76

35.28

109.86

13

303.62

179.10

53.63

20.94

49.95

12.49

37.46

112.04

14

310.88

183.38

53.63

20.94

52.93

13.23

39.69

114.27

15

318.31

187.76

53.63

20.94

55.97

13.99

41.98

116.56

16

325.92

192.25

53.63

20.94

59.09

14.77

44.32

118.90

17

333.71

196.84

53.63

20.94

62.29

15.57

46.72

121.29

18

341.68

201.55

53.63

20.94

65.56

16.39

49.17

123.75

19

349.85

206.36

20.94

122.54

30.64

91.91

112.85

20

358.21

211.29

20.94

125.97

31.49

94.48

115.42

21

366.77

216.34

20.94

129.48

32.37

97.11

118.06

22

375.54

221.51

20.94

133.08

33.27

99.81

120.75

23

384.51

226.81

20.94

136.76

34.19

102.57

123.51

24

393.70

232.23

20.94

140.53

35.13

105.39

126.34

25

403.11

237.78

20.94

144.39

36.10

108.29

129.23

26

412.74

243.46

20.94

148.34

37.08

111.25

132.20

27

422.61

249.28

20.94

152.38

38.10

114.29

135.23

28

432.71

255.24

20.94

156.53

39.13

117.39

138.34

157

Investme

Return

Running

Principal & interest paid

Depreciati

Pre-tax

After-tax

Cash

profit

flow

Tax

Yea
nt

cost

back

on

profit

6=2-3-4-5

8=6-7

9=8+5+4-1

29

443.05

261.34

20.94

160.77

40.19

120.58

141.52

30

453.64

267.59

20.94

165.11

41.28

123.83

144.78

31

464.48

273.98

20.94

169.56

42.39

127.17

148.11

32

475.58

280.53

20.94

174.11

43.53

130.58

151.53

33

486.95

287.23

20.94

178.77

44.69

134.08

155.02

34

498.59

294.10

20.94

183.54

45.89

137.66

158.60

35

510.50

301.13

20.94

188.43

47.11

141.32

162.27

36

522.70

308.32

20.94

193.44

48.36

145.08

166.02

37

535.20

315.69

20.94

198.56

49.64

148.92

169.86

38

547.99

323.24

20.94

203.81

50.95

152.85

173.80

39

561.09

330.96

20.94

209.18

52.29

156.88

177.83

40

574.50

338.87

20.94

214.68

53.67

161.01

181.95

41

588.23

346.97

20.94

220.31

55.08

165.23

186.18

42

602.28

355.27

20.94

226.07

56.52

169.56

190.50

43

616.68

363.76

20.94

231.98

57.99

173.98

194.93

3,735.47

4,539.97

FIRR

11.5%

837.77

804.50

837.77

Table 5-8 FIRR Calculation Results (Case 2)


(US Mi.$
Investme

Return

Running

Principal & interest paid

Depreciati

Pre-tax

After-tax

Cash

profit

flow

8=6-7

9=8+5+4-1

Tax

Yea
nt

cost

back

on

profit

6=2-3-4-5

r
7

190.93

-190.93

190.93

-190.93

190.93

-190.93

181.44

87.27

30.88

14.32

48.97

12.24

36.72

81.93

185.78

89.36

30.88

14.32

51.22

12.80

38.41

83.61

190.22

91.49

30.88

14.32

53.52

13.38

40.14

85.34

194.76

93.68

30.88

14.32

55.88

13.97

41.91

87.11

199.42

95.92

30.88

14.32

58.30

14.57

43.72

88.92

204.18

98.21

30.88

14.32

60.77

15.19

45.58

90.78

10

209.07

100.56

30.88

14.32

63.30

15.83

47.48

92.68

11

214.06

102.96

30.88

14.32

65.90

16.47

49.42

94.62

12

219.18

105.42

30.88

14.32

68.55

17.14

51.41

96.62

13

224.42

107.94

30.88

14.32

71.27

17.82

53.45

98.65

158

Investme

Return

Running

Principal & interest paid

Depreciati

Pre-tax

After-tax

Cash

profit

flow

Tax

Yea
nt

cost

back

on

profit

6=2-3-4-5

8=6-7

9=8+5+4-1

14

229.78

110.52

30.88

14.32

74.05

18.51

55.54

100.74

15

235.27

113.17

30.88

14.32

76.90

19.23

57.68

102.88

16

240.89

115.87

30.88

14.32

79.82

19.96

59.87

105.07

17

246.65

118.64

30.88

14.32

82.81

20.70

62.11

107.31

18

252.55

121.48

30.88

14.32

85.87

21.47

64.40

109.60

19

258.58

124.38

14.32

119.88

29.97

89.91

104.23

20

264.76

127.35

14.32

123.09

30.77

92.32

106.64

21

271.09

130.39

14.32

126.38

31.59

94.78

109.10

22

277.57

133.51

14.32

129.74

32.43

97.30

111.62

23

284.20

136.70

14.32

133.18

33.30

99.89

114.21

24

291.00

139.97

14.32

136.71

34.18

102.53

116.85

25

297.95

143.31

14.32

140.32

35.08

105.24

119.56

26

305.07

146.74

14.32

144.01

36.00

108.01

122.33

27

312.36

150.25

14.32

147.80

36.95

110.85

125.17

28

319.83

153.84

14.32

151.67

37.92

113.75

128.07

29

327.47

157.51

14.32

155.64

38.91

116.73

131.05

30

335.30

161.28

14.32

159.70

39.92

119.77

134.10

31

343.31

165.13

14.32

163.86

40.96

122.89

137.21

32

351.52

169.08

14.32

168.12

42.03

126.09

140.41

33

359.92

173.12

14.32

172.48

43.12

129.36

143.68

34

368.52

177.26

14.32

176.94

44.24

132.71

147.03

35

377.33

181.50

14.32

181.51

45.38

136.14

150.46

36

386.35

185.83

14.32

186.19

46.55

139.65

153.97

37

395.58

190.27

14.32

190.99

47.75

143.24

157.56

38

405.03

194.82

14.32

195.89

48.97

146.92

161.24

39

414.72

199.48

14.32

200.92

50.23

150.69

165.01

40

424.63

204.25

14.32

206.06

51.52

154.55

168.87

41

434.78

209.13

14.32

211.33

52.83

158.50

172.82

42

445.17

214.13

14.32

216.72

54.18

162.54

176.86

43

455.81

219.24

14.32

222.24

55.56

166.68

181.00

3,868.88

4,332.10

FIRR

14.3%

572.80

463.22

572.80

159

2Economic internal rate of returns (EIRR)


EIRR is a discout rate where the present value of social benefits of a project carried out chiefly by public
organization becomes equal to the present value of social costs. Because this is a project carried out by private
firms, EIRR calculation is omitted.

3General appraisal
Calculation results put FIRR of the proposed project at 11.5% (Case 1) and 14.3% (Case 2).
These results considerably outstrip Indonesias long-term interest rate (7~9%), thus suggesting excellent
feasibility of this project.
As one of the reasons, it is attributable to that the project is free from the running cost incurring in land use,
because the site for power plant construction has already been secured by ASC. Among others, availability of
relatively inexpensive subbituminous coals abundant in coal-rich Indonesia can be cited.
On top of these, the project is expected to allow electric power procurement for much cheaper price than
offered by PLN and, through inverse current of power into PLNs grids which are badly in need of electricity, the
project can contribute to alleviating Indonesias tightening electricity supply and demand.
In the meantime, while the calculations were made by setting the PLNs purchase price cheap at 656 Rp/kWh
(approx. 6 cents/kWh) identical to that for in-house power producers surplus output, the price is actually settled
by bilateral negotiations with PLN. Considering the projects contribution to mitigating PLNs grid problems, a
likelihood is that a higher price can be settled by negotiations. If so, with FIRR standing higher than calculated
this time, this project is likely to demonstrate even more excellent feasibility in economic terms.

160

Chapter6
Planned Project Schedule

The execution schedule of the project is as follows. This project is construction of the power plant executed in
existing plant premises. Therefore, there is no problem of concerning making the site safe. In addition, there are
too neither of problems concerning the influence on an environmental society, too. In other words, it is judged that
achievement that is smoother than the construction of a new power plant is possible.

Fig.6-1 Project Schedule


(Fiscal Year)
(Quarter)

2015
1

2016
2

2017
2

2018
2

2019
2

detailed FS
Planning
detailed design

SPC Formation
Securing
resource

of
Financing

IUPTL & WU
Obtaining
permits

of
AMDAL

PPA with PLN

Coal Supply Agreement


Contract
negotiation
EPC Selection and Contract
O&M
Selection
Contract

and

Construction Plant Construction


process
(Operation starting)

Source: Study Team

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Chapter7
Implementing Organizations

(1) Competent Organizations of the Host Country


To realize the proposed project essentially requires the preparation of good environment for project
organization, for which negotiation/coordination and cooperation with the host countrys competent offices &
organizations, listed below, become a matter of vital importance. Their jurisdictions and roles, among others, are
summarized below (to the extent they are involved in project implementation).
Table 7-1 Jurisdictions & Roles of Host Countrys Competent Organizations
Competent Organizations
Indonesian
Government

Ministry of Energy

Jurisdictions & Roles


Approval of service area for electricity supply service.

and Mineral
Resources

Cilegon City

Mines & Energy


Div. , Bureau of
Commerce &

Licensing of electricity supply service


Approval of selling price for electricity supply in the service area
involved when electricity supply service is offered.

Industry Coops
Local Bureau of
Environment
PLN

Approval of AMDAL
Management/supervision of environmental monitoring
Approval of service-area transfer involved when electricity supply
service is offered.
Conclusion of PPA (for selling electricity to PLN) when electricity
supply service is offered.
Source: Prepared by the fact-finding mission.

(2)Participating Entities in the Project


The entities participating in the efforts to organize the project and their roles & responsibilities are summarized
below.

1) Project development stage


To begin with, this project was planned in an attempt to satisfy Asahimas Chemicals needs. Accordingly,
during the initial stage of project development, reviews on the peoject fesibility and efforts to install (prepare)
good environment for project organization will be made under the leadership taken by the company.
Afterwords, it is planned that the entities participating in the project will form a prime organizer (SPC),27
which will act as the principal entity in making various efforts for preparing project environment.

Japanese trading companies and electric utilities, among others, are assumed to be major contributories.
Meanwhile, through the provision of its site (contribution in kind), Asahimas Chemical is likely to seek a direction of
having influence on this project in the capacity of off-taker.
27

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Table 7-2 Entities Participating in Project Development Stage and Their Roles & Responsibilities
Entities

Roles & Responsibilities

Asahimas Chemical

(Initial project development stage)


Detailed FS
Preparing electricity-supply-service license application.
Negotiating service-area approval for electricity supply service.
Preparing AMDAL application.
Negotiating PPA with PLN.
Negotiating long-term supply contracts with coal supply sources.
Selection and negotiation of EPC/O&M
Arranging SPC formation.
Negotiating finance.
Obtaining the electricity-supply-service license.

SPC

Obtaining the service-area approval for electricity supply service.


Obtaining AMDAL approval.
Concluding PPA with PLN.
Concluding PPA with ASC.
Concluding long-term supply contracts with coal supply sources.
Concluding EPC/O&M contracts.
Finance close
Source: Prepared by the fact-finding mission.

2) Project implementation stage


During the project implementation stage, SPC will act as the project entity and offer electricity supply services
to the off-takers (Asahimas Chemical and PLN).

Table 7-3 Entities Participating in Project Implementation Stage and Their Role& Responsibilities
Entities
Asahimas Chemical

Roles/Responsibilities
Participating in the project in the capacity of contributory in kind
(provision of land).
Concluding PPA with SPC as a major off-taker.
(After the plant commissioned) receiving electricity and paying its
tariff.

SPC

Preparing the project system.


(After the plant commissioned) offering electricity supply
services.
O&M(management)
Source: Prepared by the fact-finding mission.

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Chapter8
Technical Advantage of Japanese Companies

(1) Participation form of Japanese companies that are assumed (investment,


equipment supply, facilities operation and management, etc.)
The subject project of this FS study, we aim to take advantage of JBIC's project finance, to do so is essential
proactive involvement of Japanese companies. Also when receiving investment from other investors and lenders,
Japanese companies proactive involvement of the leading credit material.
Specifically, participation of Japanese companies to the following field is assumed.

1) Investment
Projects that are subject to Overseas Untied Loan Insurance of project finance and NEXI by JBIC (Japan trade
insurance) are generally of the entire Japanese companies Invested has been demanded more than 30% of the total
amount of investment. Have been made also mention that effect at the time of hearing from JBIC.
As a candidate of Japanese companies that may be investor, Japanese power companies, trading companies, and
the AGC and the like are considered.
It should be noted that, as a candidate of Japan other than companies overseas investors, overseas power
investment company (IPP companies of Asia where Japanese companies have invested, etc.), be considered such
as Indonesia domestic operators.

2) Equipment supply
The domestic heavy electrical manufacturers, many companies that had a high level of technology and product
development capabilities that meet the advanced technology needs, environment compared to overseas
correspondence, energy conservation, and the competitiveness excellent technical aspects such as smaller and
lighter have.
Also super critical pressure (SC) power generation facilities, has been forming technology in harsh
environmental standards for many years in Japan, I have a wealth of delivery record. Recently has increased the
cost competition with overseas manufacturers (especially China), but the reliability of Japanese companies in the
technical high.
Looking at the track record orders of overseas Japanese manufacturers since 2011 related to supercritical
pressure (SC) coal-fired equipment, Japanese manufactures have been piled up orders steadly, such as Toshiba
from India and South Korea, Hitachi (now: Mitsubishi Hitachi Power Systems) from India, Mitsubishi Heavy
Industries (now: Mitsubishi Hitachi Power Systems) from Taiwan, etc.
On the other hand, CFB (circulating fluidized bed) boiler has been developed and commercialized originally by
Western companies, such as Foster Wheeler and Lulgi as two large companies, as well as Kvaerner, Battelle, and
Germany Babcock Wilcock etc.
Japanese companies are also manufacturing CFB boiler by receiving technical assistance from companies in
Europe and the United States. Major Japanese companies are Sumitomo Heavy Industries (technology partner:
Foster Wheeler), Mitsubishi Heavy Industries (same: Lulgi), Mitsui Engineering & Shipbuilding (same: Battelle),
FJK (same: Stein Mueller), etc.
Orders received by world two major companies (Foster Wheeler, Lulgi) for 1985-2006 years (amount of

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evaporation 150t / h or more) is totally 116, while four major Japanese companies recieved 20 orders (amount of
evaporation 150t / h or more) from 1989 to 2007.
In this way, received orders of Japanese companies is less compared to two large companies overseas, recently,
such as orders for CFB coal-fired the Sumitomo Heavy Industries utilizing the low-goods coal from Antam in
Indonesia in 2013, steadily It has been active, according to the expert hearing, there is a reputation for technical
reliability of the height of Japanese companies.

3) Operation and management of the facility


JBIC is, as a general condition of overseas investment finance, the O & M of the power plant, Japanese
companies are seeking that the conduct (including or Japanese companies (AGC / ASC) is a local company that
credible that you can control).
Candidate of Japanese companies doing O & M are Japanese trading companies, power companies, include the
Heavy manufacturer based plant service companies.

Tab.8- 1

envisioned project scheme

PLN

ASC

JBIC
AGC

SPC)

NEXI

EPC

Note: Shaded part of the orange: Areas involved is expected of Japanese companies or Japanese companies.
Light blue shaded part: Japan's public institutions.

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(2) Superiority of Japanese companies during the project implementation


(technical, economic)
1) Technical Superiority
Japanese companies, for supercritical pressure power generation equipment and CFB power plant, in technical,
I is thought to maintain the superiority against foreign companies.
Has been to form a technology related to critical pressure / CFB power generation in strict environmental
standards for many years in Japan, the art of power generation facilities by Japanese companies is at a high level
in the world, and has a rich delivery record.
Although the cost there is a competition with Asian companies, trust in the Japanese companies in the
technology surface is maintained.
In Japan, it is necessary to satisfy the stringent environmental standards than Western for regulations such as
local governments to define separately, this for power generation technology I said to mature.
Domestic power generation technology, not only in plant performance, operation and maintenance technology
and advanced automation operation and high capacity utilization is also in high art in the world. Japanese
companies, by corresponding to customer requirements have established the operation and maintenance support
system.
The Japanese company is able to utilize the good software technology, we propose a system infrastructure
competitive.
Japanese companies, has an excellent competitiveness in the field of environmental load reduction and energy
conservation. In particular, against the background of the technical capabilities that we have developed in
response to a major customer power company in the domestic market, and have been successful in obtaining a
high trust from overseas customers.

2) Economic superiority

a) The loan limit for coal-fired power plant


In public institutions of Europe and the United States, has spread the movement to limit the public financing
assistance to coal-fired power plants.
President Obama Climate Change Action Plan
June 25, 2013, President Obama announced "the President climate change action plan." Regulations as follows
for US initiatives against challenge of climate change.
US government public support of the end for the coal-fired new overseas. However (a) economical alternative
means maximum efficiency of coal-fired technology in the absence of the poorest countries, or (b) if you want
to introduce a carbon dioxide separation, capture and storage (CCS) technology is excluded.
- For other countries and multilateral development banks, I will seek as soon as possible similar take action.

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Impact of Obama Action Plan


A. US
US Treasury announced a "guidance for the US position on MDB involvement in coal-fired in developing
countries" in October 2013. (CO2 emission standards in financing requirements for new coal-fired plant
(500g-CO2 / kWh), CCS introduction request, etc.)
US EXIM also new lending guidelines announced along the December Obama action plan.
Conducted call also to other countries, the Nordic countries in September (Denmark, Finland, Iceland, Noruuei,
Sweden) and the joint statement issued in accordance with the new coal-fired for public financial assistance
canceled overseas jointly. The United Kingdom also expressed their agreement in November.
B. MDB (Multilateral Development Banks)
The World Bank Group in July, the energy sector in support policy, new loans to coal-fired other than coal
economical choice strict lending policy announcement that only if there is no.
EIB also in July, (emissions per unit basis introduction of 550gCO2 / kWh) fossil adopted the selection and
evaluation criteria of fuel power generation projects, including the stringent lending conditions to the new
firepower.
EBRD also in December, adopted a new lending policy relating to energy project (other with the exception of
the extremely rare cases, such as there is no choice of economically alternative energy sources, does not
perform the new coal fire support).

After a review of the JBIC, it was found that the above motion is directly limited to the export financing (export
credit). The handling of coal-fired in export credit, currently have been conducted to examine towards the revision
of the OECD export credit guideline (arrangement), it is expected that conclusion comes out in about a year. If the
ball lands in conclusion, the Japanese government and JBIC will basically follow this guidline.
On the other hand, investment finance is a different world from export finance, and the direct impact of the
Obama initiative is small. They said that there is no particular problem regarding the investment finance for
super-critical pressure (SC) and CFB. However, they said that more high efficiency for CFB will be preferred.

Whether this trend is to expand how the future, there is a continuing need to perform the attention.
However, amid the surge energy demand mainly in developing countries future, supply is stable, the country to
select the excellent coal-fired power generation in the economy as a national plan many, further expansion of coal
use is expected. For this reason, there is also energy situation of developing countries countries, the close the
option of introducing a coal-fired I considered difficult.
In Indonesia, has serious power supply and demand problem due to a lack of power supply, the construction of
coal-fired power generation using a rich coal of domestic, it is promoted by citing the country.
On the other hand, in order to obtain an understanding of investors and lending institutions to SPC also, with
high efficiency, low carbon emission type as much as possible, it may be desirable to introduce friendly coal-fired
to the environment.

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b) Efforts of Japanese government and governmental agencies


The Japanese government, sing infrastructure system export support and strategic economic cooperation,
including the coal-fired power plants, infrastructure systems overseas orders of Japanese companies (including the
amount of revenue by business investment), and about 30 trillion yen in 2020 goal that has been set.
The Ministry of Economy, Trade and Industry, for orders promotion of individual projects, from the stage of
project identification through to finance stage, in order to implement a consistent support, you are strengthening
the cooperation with institutions with specific economic cooperation tool.
JICA also in October 2012, in addition to private companies overseas investment function to perform support
by investments and loans to projects implemented, was resumed in about 10 years in the developing world, in
cooperation with the Government of Indonesia, Indonesia I'm working on a project to disseminate high-efficiency
coal-fired power generation technology to.
In this way, the Japanese government has been working on infrastructure system export support by raising the
country, including the financing side, it is believed that in the reassuring also for the present project.

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(3) Measures necessary in order to facilitate the orders of Japanese


companies
This project is aimed at the composition of the business projects that utilize JBIC project finance.
In public institutions of Europe and the United States, has been out a move to limit the export financing
assistance to coal-fired power plants, the finance of rise from emerging countries such as China are expected. This
project is not intended to deny the investment from these emerging countries.
Japanese companies are doing efforts toward low-carbon through the dissemination of technologies such as
supercritical coal-fired power plants. On the other hand, Asian manufacturers such as China, South Korea, Taiwan
are enhancing cost competitiveness.
For this reason, in order for technology capability of Japanese companies to contribute to the relaxation of
Indonesia's power supply and demand problem, public support by JBIC, JICA, NEXI etc. is necessary and
essential.

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