Asia news

E&T reports from our base in Malaysia.

Loan stalemate threatens power project

Negotiations between Indonesia and China over the payment of loans have ended in stalemate, threatening to halt work on 35 new coal-fired power plants in Indonesia.

China is withholding US$870m of the $1.48bn loan to finance the construction of the plants (see E&T Vol 4 #5), having failed to get Indonesia's state-owned Merpati Nusanata Airlines to honour a June 2006 contract to buy15 Xinzhou-60 turboprop aircraft from China's state-owned Xi'an Aircraft Industry Corp.

Under a loan agreement signed in April 2008, China disbursed the initial $610m through the China Import Export Bank, one of the three banks involved in providing the loan along with China Development Bank and Bank of China.

The power project involves ten plants in Java and another 25 in remote parts of Indonesia under the so-called 10,000MW Programme, which is intended to make electricity more widely available across the nation. Contracts for all the 35 have been awarded and construction of some started in September 2008.

A power station in Acheh is due to be operational next year and one in east Java in 2011.

Indonesia's Minister for Energy and Mineral resources, Purnomo Yusgiantoro, said the government will have to look at other avenues of financing if China refuses to pay the outstanding amount. Asked whether construction of some of the plants would be shelved or postponed due to lack of funding, Purnomo claimed that state-owned power company PLN would be able to resolve the issue.

Indonesia has secured 77 per cent financing of the $8bn required to build the 35 plants.

However, PLN is in debt to the tune of $6.6bn and is negotiating with local and international banks to secure $3.3bn loans to service its creditors.

PLN has been one of the biggest loss-making state companies in Indonesia. It accounted for 91 per cent of the total losses recorded by state-owned firms last year.

Thai airline added to EU blacklist

Thai low-cost carrier One Two Go Airlines has been banned from flying to the 27-nation European Union with immediate effect. Indonesia's 51 carriers are excluded for the third consecutive year, and Cambodia-based Siem Reap Airways International is also barred.

Privately-owned One Two Go, which is based in Bangkok, has been blacklisted for its poor safety record. It operates a fleet of ageing MD-80s, one of which crashed at Phuket International Airport on 15 September 2007, killing 90 people. The subsequent report blamed human error in poor weather conditions. A day after the crash, One Two Go's fleet of seven MD80s were grounded by Thailand's Department of Civil Aviation for a maintenance audit.

Siem Reap Airways is a Thai-Cambodian joint venture carrier set up in 2007.

Indonesia's airlines' extended ban does not come as a surprise. In the first three months of this year there were seven incidents where the aircraft overshot the runway after landing, though there were no fatalities. A Ministry of Transport spokesman in Jakarta says that the carriers involved were reprimanded, but declined to be drawn into further comment.

However, a team of European experts who visited Indonesia reported considerable improvements. The Commission says it is continuing close consultations with the aviation authorities with a view to reassessing the safety situation.

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