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The government, in return for agreeing to provide loan
guarantees for major infrastructure projects, will expect investors to
deliver the projects on time and to fulfill their output targets.
A failure to do so, State Minister for National Development Planning
Paskah Suzetta said Thursday, could lead to the government seeking
compensation, or to reduce the scope of its risk guarantees.
"The principle is that there should be a quid pro quo for a
government's guarantee," Paskah said.
"If the government guarantees the project risks, then investors must
also do their part. If their work is unsatisfactory, then the
government should have the right to file a claim."
Paskah said that such "mutual safeguards" were needed as there was
growing concern among the public that the guarantees extended for major
infrastructure projects could lead to bigger state liabilities, apart
altogether from greater pressure on the national budget.
"So, I don't think it will come at the expense of anyone -- it will be
a win-win solution," he said, adding that the proposal would also be
applied to the projects that will be offered during the government's
upcoming Infrastructure Summit in November.
The government recently ordered PLN to hold tenders for the fast-track
construction of a number of coal-fired power plants across the country
with a total output of 10,000MW. Taken together, the projects are
valued at Rp 170 trillion (US$18.5 billion).
It is hoped that the new plants will secure Indonesia's power supplies
for the next three years, and save some Rp 25 trillion in fuel costs.
Many of PLN's existing plants use oil-based fuels, the prices of which
have increased dramatically lately, pushing the government to seek
cheaper, alternative energy sources, including tapping into the
countries abundant supplies of natural gas and coal, as well as
promoting biofuels.
Of the Rp 170 trillion cost of the new power plants, some Rp 79
trillion will be provided by overseas creditors, Rp 59 trillion taken
from PLN's internal cash reserves and Rp 33 trillion raised in a PLN
bond issue.
The government plans to issue a Presidential Regulation that will serve
as the legal basis for extending guarantees through the Finance
Ministry for risks that may arise during the financing, construction
and marketing stages.
The Finance Ministry's director general of the treasury, Mulia P.
Nasution, has warned, however, that the guarantee scheme for the power
plant projects could affect the budget deficit in the year of their
completion.
Meanwhile, Paskah declined to elaborate on how much coverage the
government would provide in respect of each project, saying this would
be discussed with the investors during the contract-negotiating stage.
Under the latest government proposals, any falling behind in schedule
or failure to meet output targets would later have to be accounted for.
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