Global Business Guide Indonesia

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DEN Indonesia | Mr Mugi Rahardjo
Mr Mugi Rahardjo

There are many opportunities to be taken advantage of in this sector, and we expect that this will continue to be the case going forward given the new government’s very promising announcement of their plan to add 35,000 MW over the next five years

Mr Mugi Rahardjo, President Director

Global Business Guide’s audience is familiar with DEN Indonesia as a leading boiler manufacturer specialising in boilers for small scale power plants. What are the main developments that have taken place at the company over the past year?

Our big achievement over the course of 2014 was the turn-over of our project on Karimun Island, in which we developed a stoker boiler for a 2x7 MW steam power plant that is the first in Indonesia to feature more than 70% locally made content. We have also been focused on the successful extension of our contract to provide plant maintenance services to an LNG plant in Kalimantan. In addition to this, we have been increasingly active in exploring opportunities in the private sector market and recently signed an agreement with a partner in Indonesia to build a 2x15 MW steam power plant.

Indonesia’s new administration has been forthcoming in setting out ambitious power generation projects such as a 5,000 MW project in Central Java. With this context in mind, what is your outlook for Indonesia’s power generation sector?

There are many opportunities to be taken advantage of in this sector, and we expect that this will continue to be the case going forward given the new government’s very promising announcement of their plan to add 35,000 MW over the next five years. To reach this target, the government will encourage both state owned enterprises and IPPs to undertake new projects, which is positive news for us as a provider of boilers and engineering services.

With that said, Indonesia continues to present several challenges for companies involved in power generation; not least the need for better coordination and cooperation across the different sectors that play a role in the successful completion of a power plant project. Furthermore, the land acquisition process still poses problems, particularly because there is a limited amount of land suitable for large-scale power plant facilities. Power plants tend to be located in coastal areas, and it is here that we would benefit from greater coordination between the energy sector and other areas of business, such as the maritime industries.

In your opinion, what should be the priority areas to address by the government in relation to Indonesia’s electricity sector and increasing the rate of electrification?

Indonesia has multiple priorities that require immediate attention when it comes to increasing the electrification ratio, because the country’s progress in this regard has slowed over the last two to three years. Of these key areas to focus on, it is my view that the government should first and foremost emphasise the importance of building high quality, international standard power plants. When making a 20-30 year investment, quality should be the primary concern.

At the same time, to close the gap between supply and demand the government should look to mass production. There are several small islands in Indonesia that require power generation facilities ranging between 7 MW and 15 MW, and it is these power plants that can be built using the mass production approach to ensure consistency and good quality at a cost effective price.

Renewable energy and shifting Indonesia’s dependence away from fossil fuels continues to be a priority for the government. Biomass is one such area that remains under-utilised in the country. How is DEN Indonesia tapping into biomass through its boiler products?

Biomass is abundant in Indonesia, and as such we are very interested in using this renewable resource to mix with coal as fuel. We are most interested in further researching opportunities to use empty fruit bunches - a byproduct of the palm oil industry - as biomass. Our company has already initiated cooperation with a partner from Europe to bring in the technology needed for this initiative, which would be the first of its kind in Indonesia.

DEN Indonesia has been involved in a number of projects across Indonesia. What more can you tell us about your recent as well as upcoming projects?

In addition to the previously mentioned Karimun project, several of our small scale power plants in areas such as Ende and Tidore are now in the commissioning stage. Going forward, our company sees opportunities in supporting the development of small scale power plants; there are still hundreds of these needed across the archipelago’s many islands. The eastern part of Indonesia should be a priority, given the continued use of oil for power generation in that area and the high demand for facilities that would enable the use of more cost-effective fuel sources such as coal, biomass or gas.

In regards to our shift towards private sector opportunities, we have seen demand from the mining industry. Many companies within this field of business continue to use oil to power their operations, and there is now growing interest to shift to coal. The pulp and paper industry also presents an opening for us to serve the private sector by providing our boiler products.

Local content requirements for energy related projects continue to be both a challenge as well as an opportunity in Indonesia. What developments have taken place at DEN Indonesia in terms of component manufacture for the local market?

Our company has been active in developing the capability to locally manufacture parts needed for our products. This is becoming increasingly important because the local content requirement for our sector is currently set at a minimum of 60% for small power plants. However, we still cooperate with partners in China, Japan, and Europe for certain components. Steam drums, for example, are manufactured in accordance with our specific designs by a partner in China to ensure that we meet international standards for our products.

The company has begun engaging with a number of international partners for research and development. What can you tell us about your recent collaborations and further areas where you see potential to work with global partners?

Among our recent collaborations is a partnership with a European firm that has provided us with a combustor for empty fruit bunches that can be installed within our boiler technology. We have also worked with a UK-based company to provide high-tech solutions when upgrading existing boilers operated by national companies in Indonesia, as well as been approached by a Japanese company looking to set up component manufacturing facilities in Indonesia.

We are most interested in working with partners that are able to bring in new technology as well as expand the market. Our company is currently capable of manufacturing boilers tapping into spreader stoker technology for projects ranging up to 35 MW. We would like to work with a company with access to different boiler technology that would open up other types of projects.

As a final message, what should Global Business Guide’s readers remember about DEN Indonesia?

It is our goal to become a significant player in Indonesia’s power generation sector, well known for the manufacture of high quality boilers and the provision of top notch engineering services. We started our business with a focus on boilers for small scale power plants and would like to build on this experience to continue to evolve as a company. As we continue to grow and develop, we are open to partnering with international firms and encourage them to enter a market with huge untapped potential for power generation.