Indonesia guarantees coal-fired power plant loans

Indonesia guarantees coal-fired power plant loans

Indonesia is guaranteeing repayment of loans extended to state electricity firm, PT Perusahaan Listrik Negara (PLN), to encourage the building of new coal-fired power plants, the finance ministry said on Thursday.

Indonesia, struggling to cope with electricity shortages, has said it will speed up construction of 10,000 megawatts of coal-fired power plants to add capacity between 2006 and 2010, as the country tries to catch up with rising electricity demand.

“The government gives a guarantee for repayment of PT Perusahaan Listrik Negara (PLN)’s obligation to creditors which have provided loans,” a statement from the finance ministry said.

“The government can provide a guarantee for foreign loans made to PLN to support development of infrastructure in the electricity sector for coal-fired power plants.”

Indonesia’s annual power demand is estimated to be growing at around 10 percent a year, making it one of the most robust power markets in Southeast Asia.

PLN, the sole electricity provider in the world’s fourth most populous country, operates 24,000 MW of generation capacity currently, but most of its plants are ageing, so daily output is far below capacity.

PLN wants to cut its use of oil products such as diesel and fuel oil in power plants to 22 percent in 2006 from 30 percent following higher global oil prices. It plans to move to other sources such as natural gas and coal, of which Indonesia has abundant supplies.

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