ISDN Holdings to enter RI hydropower sector

By Ruli Setiawan

SGX-listed ISDN Holdings Limited said in a statement that it has proposed to acquire two Indonesian energy-related concerns including a 40.8 percent stake in PT Prisma Karun Energy and a 80 percent interest in PT Potensia Tomini Energi, both of which engaged in hydropower projects in Indonesia.

The acquisition would allow the group a valuable foothold in Indonesia?s fast growing energy sector as the integrated engineering solutions company diversifies into the energy sector, the statement said.

The rest of the statement, obtained on Tuesday, read as follows.

PT Prisma Karun Energy has to date inked a power purchase agreement (PPA) with Indonesia ?s staterun power distribution company, PLN (Perusahaan Listrik Negara) to develop a mini hydropower plant in South Sulawesi while PT Potensia Tomini Energi is in the process of signing a similar agreement in Central Sulawesi. The combined installed capacity of the three power plants is expected to be 18 megawatt (MW).

Based on the feasibility study conducted by PT AECOM Indonesia in March 2013 on the South Sulawesi mini hydropower plant that PT Prisma Karun Energy plans to develop, the 10 MW station is expected to produce approximately annual energy output of 59 GWh. Based on the PPA signed by PT Prisma Karun Energy with PLN, the yearly revenue may range between US$4 to 5 million over the tariff of IDR 787 or US$0.08 per KWh. Construction is expected to commence early next year and is expected to last 18-24 months.

The first income stream is expected to flow in after full operations commence.

ISDN Managing Director and President, Teo Cher Koon, said ?Our goal is to increase our portfolio size to 100 MW by the end of FY2014 with a view to doubling it within the next three to five years. We are also looking at Sumatra, Indonesia, as another possible region for hydropower development and at matured hydropower plants as a form of acquisition.

?We believe the predictable and steady cash inflow from the hydropower projects makes it ideal to be potentially turned into a business trust,? Teo added. The mini hydropower plant model is a replicable and scalable concept with relatively low running costs between 0.7 to 0.5 US cents per KWh .

Teo also said, ?Our foray into the energy sector began four years ago when we took our first steps into renewable and sustainable energy by tapping into our engineering capabilities. It was a steep learning curve but has since developed to potentially becoming a growth catalyst for the Group.?

The projects will be financed with a combination of equity and project debt financing.

Teo added, ?Robust economic growth in Indonesia has brought about strong demand in electricity with Sulawesi and Sumatra noted as two key regions that are currently underserved.

According to Central Sulawesi Governor, Longki L Djanggola, there presently could be approximately 1,000 MW shortfall in electricity that the local government aims to fully meet by 2025. Teo said, ?This translates to more than USD $2 billion in project costs.?

To undertake these developmental projects, ISDN has assembled an international project team of reputable industrial planners, geologists, civil engineers and financiers. Teo said, ?Over time we had been able to extend our reach and build a global network of industrial and professional contacts that bring to the table a groundswell of proprietary technology, financial acumen and highly-trained talent pool.?

The company recently announced several key Memorandum of Understanding (MOU) with leading multi-national partners, one of which is China Huadian, one of China ?s top five stateowned energy infrastructure builders. China Huadian has constructed and invested in a 180 MW hydropower plant at the Asahan River from Lake Toba , Sumatra . China Huadian will act as ISDN?s technology and project development partner with the possibility of an added role as investment partner.

Two weeks ago ISDN announced an MOU with IDI-I, a Japanese fund management company with energy infrastructure focused funds investing in energy and infrastructure assets in Japan and Asia , to explore opportunities to develop and invest in energy projects and to expand power production in Asia .

Teo Cher Koon concluded, ?We like the hydropower business for its minimal impact to the environment and for the direct benefit it has on the local community, as an enabler for people and businesses to live, work and thrive.?

Editing by Reiner Simanjuntak