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China Invests $17b in Indonesian Power Project

By Tito Summa Siahaan on 9:01 am May 29, 2013.
Category Business, Corporate News, Featured
Tags: China, China Power, China-Indonesia, hydropower, North Kalimantan, Power Plant

China Power will harness the power of North Kalimantan’s Tayan River for Indonesia’s largest power project. (JG Photo/Yudhi Sukma Wijaya)

Chinese companies China Power Investment Corporation and Anhui Conch Cement announced more than $17 billion of investments in Indonesia, underscoring the attractiveness and allure of the Southeast Asian nation to foreign investors.

China Power, a Chinese state-owned enterprise, has been granted permission by the Indonesian government to build what could be the archipelago’s largest-ever power plant project.

Xia Zhong, a vice president of China Power, met with Indonesia’s Energy and Mineral Resources Minister Jero Wacik late on Monday to discuss the company’s plan to develop 7,000 megawatts from hydropower plants on Kalimantan island.

The project will harness the power of the Tayan River in the newly created North Kalimantan province.

Jero told reporters in Jakarta on Monday that the Chinese firm will invest a total of $17 billion for hydroelectric plants in North Kalimantan.

“Construction will take seven years to be completed and will be divided into five phases,” he added.

China Power has concluded the preliminary study of the project and will proceed with its feasibility and environmental assessment impact study, Jero said.

“We expect to see the groundbreaking next year,” the minister added. “Construction for the first phase will be completed in one-and-a-half years. By 2015, the power plant will generate 700 megawatts of electricity,” said Jero.

The minister said that the government will not provide additional incentives.

The government has set the price level for renewable energy like hydropower considerably high to entice more investors. In comparison, the price for coal-fired power plants is around 4 to 9 cents per kilowatt-hour.

“They did not request for incentives. They think that the 24 cents per kilowatt-hour power purchase price for hydropower plant is good.”

In Indonesia, independent power producers must sell their electricity to state utility firm Perusahaan Listrik Negara, based on the government’s approved pricing.

China Power is also looking into the possibility of building a smelter for bauxite, according to Jero. “But they have yet to make any estimations,” he added.

Electricity generation is China Power’s core business and in total has power plants with a capacity to generate 80,074 MW of electricity.

Currently, the firm is building a 6,000 MW hydropower plant in Myanmar, from which the electricity will be channeled to mainland China.

China Power also has coal and aluminum assets.

Anhui announced its plan to build a cement plant in South Sulawesi at total investment of 2 billion yuan ($327 million), Bloomberg News reported on Tuesday.

Anhui’s main business in the manufacturing and selling clinkers and cement products. It distributes cement and clinkers under the brand named Conch.