By Saurabh Chaturvedi, Sam Hong and Antonio Delos Reyes

July 3, 2020 - South Korea's state-controlled utility Korea Electric Power (Kepco) is moving ahead with its plans to invest in the building of two coal-fired power plants on the Indonesian island of Java.

Kepco's board this week approved the acquisition of a 15pc stake in a joint-venture entity that will build the plants, a company official said, without naming the other partners or providing details. The two planned units of 1GW each are part of an expansion of an existing coal-fired plant, the Java 9-10 power facility.

Argus has established that the original joint-venture partners of the Java 9-10 power plant were state-controlled PLN subsidiary PT Power Indonesia with 51pc and Indonesia Stock Exchange-listed PT Barito Pacific, a mining, forestry, petrochemicals and renewable power company. The dilution of the two biggest shareholders' stakes to include Kepco has not been detailed yet.

The first unit is expected to be commissioned in late 2023 and the second is likely to be brought on line by early 2024, according to IEA Clean Coal Centre, a London-based information and analysis provider.

The plants are one of several coal-fired projects that Indonesia is planning to build to expand its electricity generation and supplies. Indonesian state-owned electricity company PT Perusahaan Listrik Negara has already entered into a 25-year power purchase agreement to procure electricity from the plants.

Indonesia, the world's biggest thermal coal exporter and a growing consumer of domestic coal, plans to expand its generation capacity to 108.4GW by 2028, according to South Korean firm Doosan Heavy Industries and Construction, which has won a contract to supply equipment for the project. Indonesia's total generation capacity stood at 64.5GW at the end of 2018, with the country's coal-fired fleet accounting for half of the capacity.

Although the new units will help Indonesia meet its goals of increasing generation capacity, the project has attracted criticism from environmental groups, such as Greenpeace. The groups allege that the plants will lead to an increase in pollution. Greenpeace lobbied the South Korean government and financial agencies to stop funding for coal-fired projects in countries, including Indonesia, in November 2019.

But the project meets Indonesia local and international environmental standards, a Kepco official told Argus yesterday.