MoU signed for US$17.8 billion hydropower project in Indonesia

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Power Construction Corporation of China (PowerChina) and PT Indonesia Kayan Hydropower Energy have signed a memorandum of understanding (MoU) to develop a hydropower project with a total investment of US$17.8 billion on the Kayan River in North Kalimantan, a province of Indonesia located on the island of Borneo.

The project will involve the construction and operation of five hydroelectric power plants with a total generation capacity of 9,000 MW.

The project will supply a new industrial estate in the province, for which an MoU was signed between PT Adhidaya Suprakencana and China Gezhouba Group International Engineering Co. earlier this month. The agreement has committed the two companies to investing up to US$10 billion to develop the Tanah Kuning Industrial Park, which will span 11,000 hectares.

PowerChina will execute the project through its subsidiary Sinohydro Corporation. The company began studying hydropower resources of the Kayan River in 2008, completing a development plan for the entire river basin in 2013, as well as the feasibility study and preliminary design of the first hydropower plant.

According to the local government, North Kalimantan's hydropower potential amounts to around 33,000 MW.

The collaboration with PowerChina is not unprecedented. The company entered the Indonesian market in 1995 and has developed infrastructure projects totaling around US$2.4 billion since. 

However, its presence in Indonesia is not entirely welcome. The company has developed fierce opposition, as in implementing its projects it has done significant damage to Indonesia's ecosystems and wildlife.

For example, a hydropower project that the company is developing in North Sumatra is thought by experts to represent an immediate and existential threat to the Tapanuli orangutan, which only survives in the province. The hydroelectric dam is being constructed in the middle of the orangutans' habitat, which will severely impact their population, estimated to be less than 800 individuals.