Research On Risk Management Of Indonesia Madura Thermal Power Project

With the deepening reform in the electricity sector, the competition among all powergeneration corporations is growing more and more intense. Under the trend of marketorientation of the electricity sector, the pressure of stricter requirement for environmentalprotection and restricted coal resources, many small-scaled thermal power plants werereplaced by nuclear, hydraulic and wind power, and new thermal power construction projectsare generally designed with high parameter equipment and capacity.China Datang Overseas Investment Co., Ltd.(CDTO), as a power investment company,has been eager for a way that will enhance economic efficiency and create opportunities fornew projects.This paper aims to give an empirical study on how to improve economic security ofoverseas thermal power projects based on the project risk rating through conductingpreliminary risk evaluation and management.The paper describes the risk evaluation and risk management process on Madura CoalFired Thermal Power Project in Indonesia through five parts.First is a description of the background, purpose and significance of risk evaluation ofMadura Project and a comparison between relevant domestic and foreign studies.Then the paper introduces relevant theories of risk management, including thedefinition of risks, risk management process, risk analysis models and risk managementmethods.The third part is a specific risk evaluation on Madura Project according to the actualcondition of Indonesia, including the political, social, economic, market, environmental, landacquisition, construction and operation risks, with such analysis methods as risk coordinatetool, AHH model risk level analysis and economic sensitivity analysis being applied tosupervise, manage and evaluate key risk indicators of the project.The fourth part points out effective and necessary coping measures to the main riskindicators recognized through risk evaluation of Madura Project, through which the negativeeffect of the risk indicators can be lowered.The fifth part illustrates the institutional risk management by CDTO, which is theestablishment of risk management commission by the project company and the formulationand implementation of all the risk management rules, regulations and procedures. Through comprehensive risk evaluation and risk management, the paper proposes thatthe transfer and coping of variable risk indicators can lower the risks of the project, thusenhancing the credit rating of the project and ensuring a stable profit return rate. Fromanother perspective, risk evaluation and management can also help the company decidewhether or not to proceed with a certain project.