Indonesian Power Generators Secure Coal Under 20-Year Contracts

Coal-fired power stations in Indonesia won’t sign new supply contracts until 2014 because they secured enough fuel to generate electricity, according to the nation’s state utility firm.

PT Perusahaan Listrik Negara arranged coal supplies of 69.2 million metric ton a year under 20-year contracts, Helmi Najamuddin, the company’s head of coal division, said in an interview today in Jakarta. The contracts include purchase by independent power producers, he said.

Coal demand for electricity generation from Listrik Negara and private power stations may rise to 67.8 million tons in 2014 from 54 million in 2012, according to data from the company. Consumption may exceed contracted supplies of 88.7 million tons in 2015 as Indonesia plans to burn more coal to compensate for declining oil output and cut its oil subsidy.

“We will start seeking additional supply starting in 2014 for 2015 onwards as new power plants begin operation,” Najamuddin said.

Power plants have options to buy more or less than the 20 percent contracted to adjust for consumption, he said. Prices are negotiated annually and must be calculated using the government’s monthly price benchmark, Najamuddin said.

No Tenders

Listrik Negara also plans to stop buying coal through tenders and may opt for “direct selection” of suppliers for future contracts, Najamuddin said. More than 20 companies including mining units of PT Adaro Energy and PT Bukit Asam currently supply the fuel to Listrik Negara and independent producers.

“Tenders aim to set prices, but now we must buy coal at the government-set benchmark prices,” Najamuddin said. “If prices have been determined, we think it won’t be necessary to buy through tenders.”

Appointing suppliers may also save time, as buying coal through tenders may take as many as four months, Najamuddin said. His team has finished a draft for the direct selection of suppliers that is subject to approval by Listrik Negara’s board.

Indonesia is adding 10,000 megawatts of coal-fired electricity generation to support its economic growth, with 6,087 megawatts, or 60 percent of the capacity, starting by year end, according to data from Listrik Negara. The company controls 28,308 megawatts of installed generating capacity, or 85 percent’s of the country’s total, data from the company show.

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