Garibaldi Thohir, President Director, Adaro Energy: Interview

Interview: Garibaldi Thohir

What can be done to further facilitate the development of independent power producers (IPPs)?

GARIBALDI THOHIR: An estimated $73bn of capital expenditure is required if the government is to reach its target of adding 35 GW of power by 2019. With Perusahaan Listrik Negara (PLN) responsible for 10 GW, new opportunities are opening up for private companies to generate the outstanding 25 GW. However, consistent policies and better coordination among government agencies is needed to reduce uncertainty and provide more visibility for investors.

I would also like to see a policy on electricity tariffs that supports the utility sector and energy suppliers for the benefit of the country, as well as the improvement of transmission and distribution grids. The development of power plants needs to be done in line with fair and transparent regulations that reflect best practices in the industry.

To what extent is land acquisition still hampering the development of power generation?

THOHIR: Land acquisition remains a major problem, especially for infrastructure projects. The implementation of Law No. 2 of 2012 on land acquisition for public infrastructure has helped ease the ownership disputes that had delayed major infrastructure projects in the past. This law gives certainty not only to land owners, but also to investors in infrastructure projects. Our 2000-MW coal power plant in Batang was the first power project implementing the law. This set a good precedent for the development of other power plants across the country. The central and regional governments provide support to PLN, its subsidiaries and IPPs by supporting land acquisition.

How can coal mining companies diversify towards renewable energy sources for power generation?

THOHIR: We will gradually diversify our power business into non-coal power plants, starting with a 50-MW solar power plant. We are working with potential partners to explore further opportunities arising from the government’s plans to boost Indonesia’s electricity generating capacity, extending our involvement beyond coal to gas and other renewable energy sources. One of the essential ingredients for a successful IPP lies in the selection of its partners. For Adaro Energy, we want to develop partnerships with internationally renowned power utility companies that have good track records as well as knowledge in building, owning and operating power plants. This will provide much-needed synergy in the development of IPP projects. We have been going downstream to power since the beginning and our goal is to support the government in promoting economic growth through the production of a sufficient energy supply.

How do you see the current pricing tariffs from PLN for IPPs evolving in the near future?

THOHIR: We believe that one of the biggest challenges in developing power plants for IPPs is the proper determination of pricing tariffs so that they are adequate for the regulator, PLN and the IPPs. There needs to be a more effective strategy that meets the goal of affordable tariffs for the general society, while also attracting substantial amounts of investment for Indonesia’s utilities.

Directing more funds into energy infrastructure is essential for healthy economic growth across all sectors of the economy. Currently, the generation capacity is struggling to keep up with electricity demand from the growing middle class and the manufacturing sector. Even though infrastructure development will require a large budget expenditure, funding in this area will reduce business and logistics costs, and lower inflation over the long term. The government’s commitment to improving infrastructure is a worthwhile investment that will strengthen the country’s competitive position and support sustainable growth.