Power to the people

Indonesia’s electricity sector has not been faring as well as its petroleum sector. Mismanagement by state electricity company PLN and disputes over the terms of 27 Independent Power Producer (IPP) contracts have brought the country to the edge of a power crisis. Experts estimate that an investment of $28.5 billion over the next ten years will be necessary to avoid crisis. It is also thought that demand could begin to outstrip supply in some parts of the country as early as this year. The new government is addressing the problem, however, and is in the process of resuming contracts with the IPPs (seven of the 27 deals have been clinched), as well as changing older decrees that stand in the way of development projects.

FIRDAUS AKMAL President Director of Indonesia Power

Indonesia Power (IP), a subsidiary of PLN, was established in 1995 as its generation business unit. Unlike PLN, IP has successfully maintained profits and expanded its activities to include power plant development, rental, operation and maintenance, as well as the trading of used plants and machinery. Betting on a fantastic Indonesian market growth (which has consistently exceeded 10% yearly since the mid-90s), plus the fact that the company is able to offer the cheapest electricity prices in the world, IP is anticipating a successful IPO (or partial privatization) in the near future. Accordingly, firm measures have been taken to meet international corporate governance standards. President Firdaus Akmal states, “our vision is to make this a public company and we are what you would call ‘the’ partner for the future power development of this country. If electricity growth is 10%, then that means that Indonesia needs an annual growth of 1,200 megawatts. IP has pledged to develop a new power plant that will cover one third of this, or about $30 million per year, so we are interested in finding strategic partners.”