August 29, 2018 Read More →

Corruption scandal roils Indonesian coal plant expansion plans

Mongabay:

A far-reaching corruption scandal centered on a proposed power plant in Indonesia has cast a shadow over the country’s risky reliance on coal as a supposedly cheap source of energy.

Antigraft investigators arrested nine people in July, including a member of the national parliament, over allegations of bribery in connection with the awarding of contracts for the $900 million Riau-1 coal-fired plant, on the island of Sumatra. Investigators have also charged the country’s social affairs minister, Idrus Marham, for his alleged involvement (the sting where the bribe was transacted in July took place at his home). They have questioned the head of state-owned utility PLN, Sofyan Basir, who is ultimately responsible for sanctioning the project. PLN has since suspended the 600-megawatt project.

Riau-1, though, is only one of dozens of coal-fired power plants planned for construction throughout Indonesia as part of the government’s ambitious push to add 35,000 megawatts of power generation to the national grid in the coming years. (The initial target date was 2019, but the government now says it may take until 2024 to get that full capacity on line.)

There are at least 18 similar plants at various stages of development — from licensing and land acquisition, to procurement of technology — that are also suspected to have been tarnished by corruption, according to the NGO Association of Ecological Action and People’s Emancipation (PAEER). In particular, so-called mine-mouth plants like Riau-1, which are built close to the coal mines that supply their fuel and for which PLN awards contracts less transparently, are particularly prone to corruption, says a coalition of environmental NGOs.

Riau-1 was awarded without a transparent bidding process by PLN subsidiary Pembangkitan Jawa Bali (PJB) to a private consortium that includes a subsidiary of the energy firm BlackGold Natural Resources. One of BlackGold’s top shareholders, Johannes Budisutrisno Kotjo, was among those arrested in the antigraft bust in July. He has been charged with paying a 4.8 billion rupiah ($328,000) bribe to Eni Maulani Saragih, who sits on the parliamentary oversight committee for energy policy and has also been charged.

In the case of BlackGold, the Singapore-listed company had “good reason to be highly motivated” to secure its stake in the Riau-1 project, according to the U.S.-based Institute for Energy Economics and Financial Analysis (IEEFA). Melissa Brown, an energy finance consultant at the IEEFA, said the project “promised to provide demand for low-grade coal which would struggle to find a market outside of Sumatra.”

The IEEFA’s Brown highlighted the “severe conflicts of interest associated with many of the mine-mouth” projects recently awarded. “In many ways, the circumstances surrounding [Riau-1] are emblematic of Indonesia’s strategic challenges,” she wrote, “due to over-reliance on coal [power plants] backed by a revolving cast of coal producers who are highly motivated to push speculative projects that will benefit narrow interests.”

More: Graft and government policy align to keep Indonesia burning coal

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