The Paiton I Power Generation Project in Indonesia

Private investments for independent power producers (IPPs) in developing countries have grown substantially since 1990s as public utilities were unable to keep pace with the countries ' electricity demand. The private investors ' experiences, however, have not been as smooth as expected with the possibility of deterioration of relationship between the investors and the host governments. The investors ' tendency to get high returns to compensate for the risks they perceive as high when investing in developing world sometimes supercedes the main concern of the host government, which is to satisfy the public demands with as low a cost as possible. Some agreements between the investors and the public entity that are crafted to stabilize returns to investors regardless the economic conditions of the host country have been ineffective when the initially anticipated conditions change sharply. The thesis develops a risk-sharing framework between private investors and hos