Antam switches to cheaper energy source for its nickel smelters

JSX-listed state miner PT Antam Tbk announced on Friday it had signed a 5-year power purchase agreement (PPA) with PT Tamboli Energy (Tamboli), covering a supply of 15MW peak load capacity of electricity to Antam?s Pomalaa ferronickel facilities from Tamboli?s 4X5MW hydro power plant.

Upon the commencement of the hydropower purchase, Antam is expected to be able to lower its ferronickel power cost by up to 8-10%, the company said.

Under the agreement, Tamboli will build and operate the hydro power plant as well as an

interconnection facility that will connect the hydro power plant with the electrical system of Antam?s ferronickel smelters at Pomalaa. Tamboli has appointed PT Bukaka Teknik Utama, as its EPC contractor.

The overall investment cost of constructing the hydro plant and the interconnection facility will be borne fully by Tamboli. The financial closure is expected to materialize within 6 months after the signing of the PPA and to be followed up by the construction of the facility, which is expected to be completed within 18 months.

Upon the commercial operation of the facilities, Antam will have the first right to purchase 75% of the produced electricity capacity by Tamboli at US$0.0565 / KWh for five years. Tamboli will sell the remaining 25% of the produced electricity capacity to PLN.

In 2007, the energy needs of Antam?s Pomalaa nickel smelter facilities, which amount to about 88MW, are supplied by 6 X 17 MW (as main power source) and 10 X 5.8MW (as backup power source) diesel fired power plants operated by Wartsila of Finland.

Currently Antam?s electricity cost is up to US$0.125 / KWh which results in cash cost of producing ferronickel at around US$5-5.50/lb. Upon the consummation of the Tamboli PPA, it is expected that Antam could reduce the ferronickel power cost by up to 8-10%, which will result in a reduction of ferronickel cash cost by up to 3 -4%. (alex)