Adaro update: Project development
Tuesday, November 11 2008 - 12:35 AM WIB
Project Development
PT Makmur Sejahtera Wisesa (MSW) Power Plant
? Powering the Conveyor
The MSW project objective is to build and operate a 2x30 megawatt (MW) coal-fired power plant to run the planned overland conveyor which will run along the existing haul road from the mine site to the Kelanis river facility. The project is expected to be completed in 2010, with a total estimated project cost of US$160 million, including interest during construction and land acquisition.
During 3Q08, Adaro Energy has made progress in terms of achieving financial closure for a US$122 million, 12 year loan at LIBOR + 375bp from the International Financial Corporation (IFC) of the World Bank. The loan is secured by the assets and shares of MSW and has no recourse to Adaro Energy. No draw downs have been made on the facility as construction has yet to begin on the power plant.
As at the end of 9M08, MSW had selected PT. Punj Lloyd Indonesia and Punj Lloyd Pte Ltd Singapore as the Engineering, Procurement and Construction (EPC) contractor. Siemens Industrial Turbomachinery S.R.O, Czech Republic has been selected as the equipment supplier.
Given the difficulties created by the financial crisis, MSW and Adaro Energy continue to review the project to determine the most appropriate stages for construction and investment.
Kelanis ? Tutupan Transportation System
- Building Capacity Along the Haul Road
A key part of the plan to double production by 2013 is to increase the transportation capacity from the mine site to the Kelanis river terminal. Currently Adaro Energy has plans to build a 68 km transport system, most likely a multi-stage conveyor, with adjacent crushing plant, stacking system and barge loaders with total capacity of 6,000t per hour (40Mt per year).
Adaro Energy?s current road transport capacity to Kelanis is about 50-55 Mt per year.
Upon completion of the conveyor, Adaro Energy will have 2 alternative modes of transportation with combined capacity of more than 80 Mt per year. Adaro Energy also has the option of boosting production by adding additional and more powerful trucks along the existing haul road. However, a key advantage of the new transportation system is that it could reduce operating costs by approximately US$2 per tonne compared to trucking.
The project is at the design phase with different alternatives being considered. It is possible the project will be executed in two phases, with construction of a conveyor half way along the distance of the haul road to Kelanis, followed by the second stage, which would be either to build an additional conveyor for the remainder of the distance, build a channel or use the existing haul road. The company has been conducting negotiations with different EPC contractors and equipment suppliers. The total project cost is currently estimated at US$350 million.
Due to the difficulties created by the dramatic reduction in access to capital caused by the global financial crisis, aspects of the project have been postponed until January 2009 although the project is still targeted for completion in 2010. Meanwhile, work will continue on acquiring necessary land, on finalizing project design and selecting the EPC.
Barito Channel
? Dredging a New Channel to Get Rid of a Bottleneck
Adaro Energy successfully completed a trial-run on the new channel that was dredged at the mouth of the Barito river, near Banjarmasin, South Kalimatan. A crucial step in Adaro Energy?s efficiency program and overall expansion plans, the dredging is ahead of schedule, with full operations expected to commence in January 2009.
President Director of Adaro Energy, Garibaldi Thohir said, ?The most important aspect of opening the new channel is that annual capacity will increase to over 200 million tonnes from 60 million tonnes. This additional capacity will help us realize our expansion plans of doubling annual production in the next five years from 40 million tonnes to 80 million tonnes.?
The existing channel is only traversable by loaded barges on the high tide once a day for a tide window of about eight hours. High siltation rates and an under-funded maintenance dredging program resulted in difficult navigation conditions in the channel. In order to increase barging efficiency and capability, at the beginning of 2008, PT Sarana Daya Mandiri (PT SDM) began a project to dredge a deeper and straighter channel. The actual dredging is being conducted and shall be maintained by Van Oord, an international dredging and marine contracting company from The Netherlands. The project is now over 90% completed and 1.5 months ahead of schedule.
The travel time of the trial run, conducted on Wednesday, October 15th, 2008, lasted 1.5 hours, or 50% of the normal time required to pass through the Barito channel. As well as faster passage, the channel may now be used 24 hours day, 365 days a year. Dredging a straight passage through the channel will increase safety as barges will no longer be required to navigate through two dangerous turns.
By using the new channel, Adaro Energy and other users will no longer have to use to two tugs (or ?tug assist?), to pull barges, which range in size from 8 ? 14,000 tonnes, through the shallow waters at the mouth of the Barito river. By only using one tug, as travel time is greatly reduced, and due to shorter barging cycle time Adaro Energy expects to incur fuel and tug cost savings.
The cost of the dredging will range between US$40 ? US$50 million and will be financed by loan provided to PT SDM by Adaro Energy. This loan will be repaid by revenues generated by users of the new channel, including Adaro Indonesia, who must pay a toll of US$0.30/ton.
PT SDM is likely to be 51% held by Adaro Energy once certain conditions within a sale and purchase agreement are satisfied [Note: as at the date of publication ? these conditions had been satisfied], and 49% by three smaller mining companies. PT SDM is the contractor to PT Ambang Barito Persada, a joint venture between the South Kalimantan government (60%) and state-owned port operator PT Pelindo III (40%), which owns a concession to build and operate a river channel through the mouth of the Barito river. Adaro Energy, with an existing capacity of 40 million tonnes per year will be the largest coal company to use the channel.
This dredging project undertaken by PT SDM is a unique alliance of a privately funded joint venture of privately held mining companies and different sections of central and provincial governments. The new channel will be available for public use and would not have been possible without the contributions and support of the local and central government. (end of excerpt)