Indonesia’s looming electricity shortage (see panel) provided an incentive for us to set up PT Adaro Power (AP) in order to to help us diversify and strengthen our business from pit to power.
We established Adaro Power in 2010 to act as a strategic vehicle for our active involvement in the development of power plants in Indonesia.
Our move into power will allow us to leverage our competitive advantage in securing coal supply and create a captive demand for our coal, boost our presence in the domestic market, secure a stable revenue stream and favorable returns, improve our bargaining position with boiler manufacturers, and minimize the impact of volatility from the cyclical nature of the coal sector.
The Government of Indonesia recently launched a 35GW electrification program. Inaugurated by President Joko Widodo in April 2015, the ambitious program is supposed to be realized by 2019.
Out of 35GW planned, coal-fired power plants have the biggest share at 20GW, followed by gas and renewables. Construction of the 20GW of coal-fired power capacity will increase coal supply needs by about 80Mt per year.
PT Makmur Sejahtera Wisesa
AE’s subsidiary, PT Makmur Sejahtera Wisesa (MSW), built, owns, and operates AE’s first power project, a 2x30 MW mine-mouth power plant in Tanjung, South Kalimantan, which powers Adaro Group’s operations in the area and provide excess power to PLN’s South and Central Kalimantan grid. This marked the Adaro Group’s concrete downstream extension to power generation. In 2017, MSW achieved availability factor of 91%, generated 382,866 MWh and consumed approximately 317,444 tonnes of E4000 coal from AI’s Wara mine.
MSW uses circulating fluidized bed (CFB) technology suitable for the combustion of higher moisture coals such as E4000 because it reduces nitrous oxide emissions due to its low combustion temperature and uses electrostatic precipitators to eliminate ash emissions. MSW’s emphasis on environmental protection has been recognized by the government through the awarding of blue category PROPER Award by the Ministry of Environment and Forestry in 2017.
PT Bhimasena Power Indonesia
BPI is a joint-venture company established by consortion of three companies: Electric Power Development Co. Ltd. (J-Power), AP, and Itochu Corporation, to develop 2x1,000 MW coal fired power plant in the Batang district of Central Java. The power plant will be one of the first and largest power plant projects in Southeast Asia and the first in Indonesia to employ ultra-supercritical (USC) pulverized coal boiler technology. Such technology will be a showcase of the latest high efficiency low emission power generation technology in the region and in the country.
The use of USC will provide higher thermal efficiency compared to subcritical technology, translating to lower coal consumption for generating per unit of electricity, and thus, lower emissions. The USC boiler will utilize low nitrous oxide (NOx) burner in fuel combustion process, which will minimize NOx emission. It will also use fabric filter, which will enable the collection of particulate (fly ash), and flue-gas desulfurization unit which will capture SO2, making the power plant one of the cleanest available.
BPI will follow strict environmental protection requirements adhering to Equator Principles III, IFC Performance Standards, and World Bank guidelines in addition to Indonesian regulations. Coal will be transported using covered belt conveyor from pier to stockpile to prevent coal dust from being ingested or inhaled by workers. Waste water from the boiler and turbine system and the run-off water from coal storage yard and solid disposable area will be channeled into a waste water treatment system before being discharged to the environment at a level that meets the applicable environmental standards.
The project reached financial close in June 2016. The total project cost is estimated to be US$4.2 billion, and BPI received a commitment for project funding of approximately US$3.4 billion from the Japan Bank for International Cooperation and several commercial financial institutions. BPI will provide electricity to PLN for 25 years based on a Power Purchase Agreement (PPA). This is the first actualized public-private partnership project in Indonesia carried out under the guarantee provided by the Indonesia Infrastructure Guarantee Fund, and also part of the Masterplan for Acceleration and Expansion of Indonesian Economic Development.
During 2017, a series of joint monitoring committee meetings were carried out to monitor the project and sharing of updates on the project construction progress. Engineering works covering civil, architectural, mechanical, electrical, and control and instrumentation are now progressing. At the end of 2017 the cumulative construction progress was 34.6%. The plant is progressing as planned and we are on track to achieve COD for both units in 2020. When fully operational, the plant will consume up to 7 Mt of coal per annum, and AI will be a major supplier to the project.
PT Tanjung Power Indonesia
TPI is a consortium of AP (65%) and PT East-West Power Indonesia (35%), a subsidiary of Korea East-West Power Co Ltd. to develop a 2x100 MW coal-fired power plant in the Tabalong district, South Kalimantan. The total project cost is estimated to be US$545 million, and in January 2017, TPI reached financial close and received commitments of US$422 million (including a contingency facility of US$13 million).The financing is done on a project finance basis, with KSURE providing comprehensive cover of approximately US$400 million.
This project will sell electricity to PLN under a PPA for a period of 25 years from the COD. TPI started construction in June 2016, six months before reaching financial close, by using shareholder funds, demonstrating strong commitment from its shareholders to the success of the government’s electrification push. The Government of Indonesia, through the Ministry of Finance, provides a government guarantee to this project in the form of a Business Viability Guarantee Letter, under which the government guarantees PLN’s ability to fulfil its payment obligations as stipulated in the PPA.
The power plant will use CFB technology which reduces NOx emissions due to its low combustion temperature. It will also use bag filters to eliminate ash emissions. The EPC contractor for the project is Hyundai Engineering Co Ltd. Operation and maintenance of the power plant will be handled by TPI. At the end of 2017, the cumulative construction progress was 85.7%. All major heavy equipment has been delivered safely to project site and special facilities, including the transmission line, have been completely constructed.
TPI’s focus in 2018 is to complete construction and prepare for the operation and maintenance phase. TPI is committed to achieve COD in 2019 as planned and will contribute to power supply in South and Central Kalimantan area. When fully operational, the plant will consume up to 1 Mt coal per annum and AI will supply the required coal.
TPI’s non-technical summary of the Environmental and Social Impact Assessment (ESIA) can be viewed here.