Bribery-tainted coal plant in Indonesia held up as landowners hold out

16-Nov-2020 Intellasia | News Mongabay | 6:02 AM Print This Post

Already facing a pandemic, a corruption scandal, and the revocation of its environmental permit, an embattled coal-fired power plant on the Indonesian island of Java faces a new obstacle: landowners refusing the compensation offered by the developer.

The 1,000-megawatt plant has been under construction since 2017 on 204 hectares (505 acres) in the coastal district of Cirebon, West Java province. The $2.2 billion facility, named Cirebon 2, is an expansion of an existing 660 MW plant operating since 2012. The Indonesian government has deemed the project a key part of its wider national strategy to boost power generation across the archipelago.

A crucial part of the Cirebon 2 project is the construction of 45 pylons to accommodate the extra power output. But scores of residents living near the site of one of the planned towers are opposed to it, saying plant operator PT Cirebon Energi Prasarana (CEPR) is not offering them enough compensation for their land.

“That site was actually targeted to be completed by this October,” company spokesman Yuda Panjaitan said earlier this month as quoted by local media.

CEPR says it can’t meet the landowners’ request because it’s only seeking to use their land rather than buy it outright. It has enlisted the Cirebon district government and police in its efforts to persuade the residents to accept its offer, but to no avail. The company says it has deposited the money into an escrow account overseen by a court, which will be paid out when the residents agree with the terms.

The opposition from residents is one of several factors holding up the project. CEPR earlier this year declared force majeure, saying the COVID-19 pandemic had slowed down construction. It says the plant is currently 80 percent complete, and plans to go online by February 2022.

The project also faces mounting pressure from environmental and anti-corruption activists, who have called on authorities to jump-start an investigation into allegations of bribery between the developer and local government officials.

South Korea’s Hyundai Engineering and Construction, which was awarded the contract to build Cirebon 2, stands accused of bribery and corruption. In November 2019, Indonesia’s national antigraft agency, the KPK, charged Hyundai’s general manager, Herry Jung, with paying the former district head of Cirebon, Sunjaya Purwadisastra, 6 billion rupiah ($424,000) to greenlight the project.

CEPR is also implicated in these allegations. In November 2019, the KPK slapped a six-month travel ban on both the company’s CEO, Heru Dewanto, and corporate affairs director, Teguh Haryono. Since then, however, the investigation has apparently stalled, observers say.

“The KPK up until now still hasn’t made any progress with this case,” said Dwi Sawung, energy and urban campaigner for the Indonesian Forum for the Environment (Walhi).

“The longer it takes for this case to advance in the court, the bigger the possibility for the perpetrators to eliminate the evidence. Meanwhile, some of the key actors in the case have been seen with several state officials and still hold public offices.”

The power plant has also been denounced for having adverse impacts on the surrounding mangrove and coastal marine ecosystems, as well as the livelihoods of the local communities, since Cirebon 1 went online eight years ago. Salt farmers have reported substantial losses in production, while traditional fishers and fish farmers say thermal, water and air pollution from the plant have also hurt their livelihoods. In April 2017, a court in the West Java capital, Bandung, ordered the revocation of Cirebon 2′s environmental permit. But the permit was reissued by the West Java government in July that year.

The Cirebon 2 project is one of several coal plant projects in Indonesia that’s mired in corruption allegations. Other high-profile cases include the Riau 1 and Indramayu projects. In South Korea, the Cirebon 2 case has also been the subject of parliamentary hearings.

“It’s become clear to see that coal power plant projects are a bribery hotspot for many people. And we must pay attention to the corruption cases involving coal plants,” said Egi Primayogha, a researcher with the INGO Indonesia Corruption Watch (ICW).

Egi called on the KPK to follow the trail of the bribery all the way to its source, and to identify others involved in the case who have not been charged to date. If the investigation can show that the license for Cirebon 2 was issued illegally, Egi said, then the project can be scrapped entirely.

He suggested the KPK expand the scope of its investigation to look into the shareholders of both CEPR and Hyundai Engineering and Construction.

CEPR is a consortium of Japanese, South Korean and Indonesian companies. Japanese trading giant Marubeni holds the largest share, at 35%, followed by Jakarta-listed Indika Energy (25%), South Korea’s Samtan (20%) and Korea Midland Power (10%), and Japan’s Chubu Electric Power (10%). CEPR has a 25-year power purchase agreement with Indonesian state utility PLN, effective until October 2040.

In addition to Hyundai Engineering and Construction, the consortium has awarded US company Black & Veatch the engineering contract for the project. The Netherlands’ ING Bank and Latham & Watkins, an international law firm, are advising on the project.

“The expansion to [investigate] corporate crime is very important to give a warning to other companies in the coal industry and coal plant industry to not do the same thing,” Egi said.


Category: Indonesia

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