In Indonesia, there are twelve market sectors of power generation business in which Indonesia EEC will be seeking prospects on a focused and proactive approach.
The Market Analysis table shows the estimated captive power project values in the dollar per year, within the period of 1999-2003, based on the present circumstances. This table is a live and dynamic table. The numbers of dollars each year could increase as the economy corrects itself.
The potential clients/customers during the five-year implementation of this plan for power generation EPC services are composed of twelve groups:
It seems reasonable, based on strong fundamentals, that the above twelve sectors have strength to be credible buyers in the Indonesian power business, since their business orientation is focused in the export market leads acceptable development risks.
Indonesia EEC will focus on major electricity consumers in Indonesia who are very demanding regarding reliability of their power supply systems.
The current situation in Indonesia can be characterized by commercial paralysis, policy paralysis, and for the moment, a continuing downward economic drift. But it seems reasonable that the previously listed twelve sectors have strength to be credible buyers in the Indonesian power business, since their business orientation is focused in the export market leads acceptable development risks. The uncertainty lies in how long the country's economic recovery will take and with what twists and turns in the political and economic structure will offer tremendous opportunities for the the company in developing badly needed, inside-the-fence captive power projects to satisfy the demand. This requirement has not diminished because of the crisis. It even increases due to the government owned power utility (PLN) absence to deliver a reliable and cost effective power system.
For the short term, the company needs to be flexible and creative in pricing and financing its services. Indonesian buyers are likely to be more dependent than ever on supplier financing, and looking for bargains; unfortunately, the current economic erosion situation has put them in a compromising position for bargaining. The company needs to be proactive in assisting its customers in finding sources of financing, inventing creative payment terms or offering a more lenient repayment period, if possible, and looking for ways to cut the price of supplies and services. Barter trade has often been a required element of major government projects, but it would be no surprise to see more emphasis on barter trade in the coming period.
EPC Contractors in power business range from major global Original Equipment Manufacturers (OEM) of the power generation and transmission plants to the local engineering and construction firms.
Some major domestic players who are estimated as Indonesia EEC's potential competitors in the power EPC business are listed below. They are politically well-connected at this time and seem to be aggressively pursuing expansion into other infrastructure markets in Indonesia, most notably in power and industrial plants.
The following companies are major foreign players in Indonesian power business:
Recent analysis indicate that total design cost of power plants in Indonesia has decreased by 12%, while total construction cost of power plants in Indonesia has decreased by 23.59% during this economic turmoil, compared to data recorded in 1996. This analysis is based on the assumptions that the local engineers and laborers salary was increased by 25% at the average exchange rate of US$1 = Rp 7,200. By having a local production capability in Indonesia, Indonesia EEC will be able to take advantage of this situation.
When the joint venture company between Indonesia EEC and its local partner has been established, it will be able to reduce costs and increase profits by having a full-service production office in Indonesia.
The critical issue for establishing a local production capability is the ability of Indonesia EEC to hire, train, and retain highly qualified and motivated Indonesian engineers.