In a strategic move towards bolstering its infrastructure and energy capabilities, Indonesia’s Ministry of Public Works and Housing is set to auction two major dam projects – the Merangin Dam and the Bodri Dam.
The innovative Government and Business Entity Cooperation (KPBU) concept has garnered significant attention, attracting interest from over a dozen of national and foreign companies.
These projects, scheduled for auction by the end of 2024, hold immense promise for the nation’s economic and energy landscape.
The Merangin Dam, located in Jambi province, has emerged as a focal point for investors eyeing Indonesia’s burgeoning energy needs.
Arvi Argyantoro, Director of Infrastructure Financing for Water Resources at the Ministry of Public Worls and Housing, revealed that the dam presents a dual opportunity for electricity generation and strategic investment.
The project’s estimated investment of IDR 3.73 trillion (US$237 million) has sparked the interest of 11 potential investors.
Arvi highlighted the unique financing model for the Merangin Dam, which is a combination of Availability Payment (AP) and tariff mechanisms.
The fusion of these approaches is poised to optimize returns on investment, thereby attracting both national and international investors.
Despite the relatively modest Internal Rate of Return (IRR), Arvi emphasized that the project remains financially viable and has already piqued the interest of investors from countries like South Korea, China, and Germany.
The Bodri Dam, on the other hand, has garnered less investor interest compared to its Merangin counterpart, although the project is more advanced in terms of auction readiness.
With an estimated investment of IDR 1.74 trillion, the Bodri Dam, located in Kendal Regency, Central Java, is designed to hold 41 million cubic meters of water.
The project’s IRR of 9.46 percent positions it as an attractive investment, offering a potential energy generation capacity of 3.2 megawatts over an 18-year concession period.
Arvi underscored the government’s commitment to initiating land preparation for the Bodri Dam in the coming week.
Although the dam may not possess the same energy development potential as the Merangin Dam, Arvi expressed optimism for future opportunities in the energy sector.
Both the Merangin and Bodri Dam projects operate under the KPBU model, signaling a significant departure from traditional financing structures.
Arvi clarified that under the KPBU scheme, project winners would not control the dammed water; instead, the government would retain responsibility for maintenance and operations.
