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November 28, 2013 1:00 pm JST

Prospects dimming for key Japanese power plant in Indonesia

HIROFUMI MATSUO, Nikkei senior staff writer

TOKYO -- Japan's efforts to export its highly efficient coal-fired power generation technology has hit a snag as delays and rising costs
threaten to derail a critical public-private project on Indonesia's Java island.
The $4 billion project covers the building and operation of a 2-million-kilowatt coal-fired power plant in Central Java. The JapaneseIndonesian consortium leading the project has secured a deal to sell power to Indonesian state-owned power company PLN (Persero) for
25 years. The Japanese partners in the consortium are Itochu and Electric Power Development, better known as J-Power.
Showcase project
The project will bring the so-called ultra-supercritical technology to the Southeast Asian
country for the first time. By burning pulverized coal and boosting the temperature and
pressure of steam that is fed into the turbine, this technology sharply improves generation
efficiency over conventional coal-fired power plants and reduces carbon dioxide emissions.
Coal power's high carbon footprint is one of its major drawback compared to other forms of
generation methods. But if the operation efficiency of existing coal-fired power plants in China,
India and the U.S. were improved to the Japanese level, the total reduction in their CO2
emissions would exceed Japan's total greenhouse gas output.
This is why the Japanese government has made this technology a priority in its industryassistance efforts. Tokyo also hopes the ultra-supercritical technology will help Japanese
businesses push back the advance of Chinese rivals in the global infrastructure development market.
"We want to make the Central Java project a showcase that will open the door to more projects," said an official at Japan's Ministry of
Economy, Trade and Industry.
Dream deferred
But this scenario has been put on hold. Due to delays in purchasing land for the planned site, $3 billion in loans that the project is
counting on from the Japan Bank of International Cooperation and private banks is not forthcoming. Without these funds, plant
construction cannot begin.
The proposed plant site will stretch roughly 2.26 million square meters, of which 87% has already been purchased. But owners of the
remaining 13% have been unwilling to sell. According to local news reports, there have been some scuffles between local residents and
people involved in the project.
J-Power and Itochu have held 50 meetings with local people to explain the project. In addition, they have put in efforts to create jobs
and promote the local economy. But these gestures seem to have failed in winning over the holdouts.
This has led Japan's trade ministry to seek more support from the Indonesian government. Even Prime Minister Shinzo Abe pitched
in, mentioning the importance of the Central Java power generation project in a speech during his Indonesian visit. It was rumored that
the prime minister also brought the subject up during his summit with President Susilo Bambang Yudhoyono.
The Indonesian government revised a presidential decree and extended the October expiry of the loan contract for the project by a
year. This has given the project some breathing space as it works toward ending the stalemate. But the fact that even the prime minister
became involved means "the project has passed the point of no return," a trade ministry official said.
The longer the start of construction is delayed, the higher the total project cost becomes. Since the consortium already agreed on the
supply price in a contract signed with the state-owned power utility in 2011, more delays in land purchases and cost increases will further

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undermine the project's bottom line.
The plight of the Central Java project highlights the challenge inherent in infrastructure project -- even an excellent technology with
government backing has no guarantee of success.

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