The Medco-Ormat-Itochu Consortium, which consists of Medco Energi Internasional Tbk; Ormat International, Inc., a subsidiary of Ormat Technologies, Inc.; and the Itochu Corporation, have signed a Heads of Agreement (“HoA”) for the Sarulla Geothermal Project. In addition to members of the Consortium, Mr. Eddie Widiono, President Director of state-owned Indonesian power company PT Perusahaan Listrik Negara (“PLN”), and Mr. Ari H. Soemarno, President & CEO of Pertamina, also signed the agreement. The signing was witnessed by The President of the Republic of Indonesia H.E. Mr. Susilo Bambang Yudhoyono and the Prime Minister of Japan, H.E. Mr. Shinzo Abe during the Japan-Indonesia Business Forum.
The Consortium received a Letter of Intent from PLN on July 25, 2006 following a tender process and, having reached preliminary agreements, expects that it will soon formalize the Deed of Assignment (“DoA”), and amendments of the Energy Sales Contract (“ESC”) with PLN and Joint Operating Contract (“JOC”) with Pertamina.
The HoA sets forth the milestones achieved in the contract negotiations and the parties’ undertaking to expedite the contracts finalization and formalization, including all relevant approval procedures.
The Sarulla Geothermal Project, located in Tapanuli Utara, North Sumatra, represents the largest single-contract geothermal project to date in the geothermal industry, and is a reflection of the large scale, high productivity and potential of Indonesian geothermal resources.
The Sarulla Geothermal project is to be constructed over the next five years. It will consist of three phases of 110 to 120 MW each, with the first power generating unit scheduled to commence operation within 30 months of the financial closing, and the remainder scheduled to commence operation over a period of 18 months following the first unit. Power delivered by the project will serve the base load of PLN’s North Sumatra – Aceh grid system.
The project will be owned and operated by the Consortium members under the framework of a JOC with the concession holder, PT Pertamina (Persero) (the state-owned oil and gas company) through its subsidiary PT Pertamina Geothermal Energy.
Medco is the leader of the Consortium, whose bid included completion of the development of the geothermal steam field, construction of the field piping systems and three Ormat designed and supplied power plants with a combined gross capacity of approximately 340 MW. The Consortium will own and operate the facilities, as well as sell electricity to PLN under a 30-year Energy Sales Contract (“ESC”). The total project cost is projected to be approximately US$800 million, and it is expected that the Japan Bank for International Corporation (“JBIC”) will provide the majority of the project financing based on the Umbrella Note of Mutual Understanding signed between the Ministry of Finance of Indonesia and JBIC.
In addition to the HOA, The Consortium and Kyushu Electric Power Co., Inc. executed a Memorandum of Understanding (MOU) on the same day. The MOU confirms Kyushu Electric’s strong interest in participating in the Sarulla Project. Kyushu Electric is one of the largest electricity utility companies in Japan and owns and operates a number of geothermal power plants in Kyushu.
Mr. Hilmi Panigoro, CEO of PT Medco Energi Internasional Tbk, said, “Geothermal is one of the primary energy resources for the future. This project will be a cornerstone for the company’s efforts to diversify its energy resources portfolio.”
Mr. Aries Pardjimanto, President Director of PT Medco Geothermal Indonesia, added, “The Sarulla project is evidence of our commitment to developing Renewable Energy Resources, and our desire to assist the Government in its effort to provide new power generation capacity in the region.”
Also commenting on the project, Lucien Bronicki, Chairman and CTO of Ormat Technologies, stated, “We are pleased that the long cooperation with Pertamina, PLN and the teams of Medco and Itochu is approaching fruition. Ormat’s air-cooled geothermal Combined Cycle technology, well proven over the last 15 years, is particularly suited to assure maximum utilization of the Sarulla resource in a sustainable manner. We pledge to continue our efforts to contribute to the development of this important renewable energy of Indonesia by sharing our experience in constructing geothermal plants in 12 countries as well as the operating experience of the plants we own in the US, Guatemala, Kenya, Nicaragua and the Philippines.”
Mr. Akira Yokota, Executive Vice President of ITOCHU Corporation, said “ITOCHU has been actively pursuing environmental renewable energy projects in several countries and geothermal power projects are also an area we have been truly focusing. Indonesia has quite rich geothermal resources and we are very glad to have achieved this valuable step in contributing to the further prosperity of Indonesia through Sarulla Power Project using such environmentally friendly resources which Indonesia owns.”
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