ISDN Holdings acquires two Indonesian energy companies

By Peni Pedriawan

SGX-listed firm ISDN Holdings Limited, an integrated engineering solutions provider for diverse industries, has through its wholly owned subsidiary, Aenergy Holdings Company Limited, has acquired majority stakes in two Indonesian energy companies, PT Alabama Energy and PT Prima Paluta Energy.

The firm said in a statement on Tuesday that it has signed a sale and purchase agreement to acquire 80 percent equity of both companies from Charles D. Marpaung and Rahmaniwati Sulaiman ? who prior to the sale were joint and equal owners of both companies.

This latest development will cement ISDN?s footprint in the vast Indonesian energy market where hydro-electric has been identified as one of the key energy sources to meet the rising demand of electricity for residential, business and industrial consumers in urban and suburban areas of the archipelago, according to the firm.

ISDN Managing Director and President, Teo Cher Koon said, ?Sumatra is one of Indonesia?s biggest island and its potential is enormous. Inhabited by about 13 million people, it offers huge opportunities in energy production as the territory ramps up its electricity sources in tandem with population and economic growth.?

PT Alabama Energy (PTAE) is primarily involved in the business of building, owning and operating hydropower plants and related businesses. It is expected to enter into a power purchase agreement (PPA) with state owned electricity firm PT Perusahaan Listrik Negara (PLN) (Persero) to build, own and operate a 9.0 megawatt (MW) mini hydroelectric power plant at the confluence of Rambe and Simonggo Rivers in the Tarabintang subdistrict, Humbang Hasundutan regency, North Sumatra province.

The PPA states that PLN will purchase the energy output produced by PTAE at a tariff rate of Rp 787 or US$0.072 per KWh for a period of 20 years.

Based on the feasibility studies originally conducted, the hydropower plant is expected to generate about 51 GWh of electricity per year translating to annual revenue of about $3.6 million. Running costs is expected to range between 0.7 and 0.5 US cents per kWh while the investment cost is estimated at $18 million.

ISDN will pay $$900,000 for its 80 percent stake in PTAE that will be funded by cash using its internal reserves, in a series of agreed milestone payments. The remaining 20 percent of PTAE will continue to be owned by Marpaung and Sulaiman in equal portions.

Similarly, PT Prima Paluta Energy (PTPPE) is primarily involved in the business of building, owning and operating hydropower plants and related businesses. Plans are in the pipeline to build, own and operate a 10.0 MW mini hydroelectric power plant at Simonggo River, in the Tarabintang subdistrict, Humbang Hasundutan regency, North Sumatra province

Under a PPA with PLN, the state firm will purchase the power produced by PTPPE at a tariff rate of Rp 787 or US$0.072 per KWh for a tenure of 20 years. The hydropower facility is expected to generate approximately 56 GWh of electricity annually, posting estimated revenue of $4 million. The project is estimated to cost about $20 million and running costs to hover between 0.7 and 0.5 US cents per KWh. The 80 percent ownership in PTPPE will cost ISDN $1 million that will be funded by the company?s cash reserves to be paid out in a series of agreed milestones. The remaining 20 percent of PTPPE will remain with Marpaung and Sulaiman.

Construction for both mini hydropower plants is expected to commence in early calendar year 2014 and to last between 18 to 24 months. The first income stream is expected to flow in after full operations commences. This latest announcement follows the announcement of a Memorandum of Understanding on 27 June 2013 that preceded the sales and purchase agreement.

Editing by Johannes Simbolon