Joint decree for Sarulla geothermal project will be signed this month

The energy and mineral resources ministry said that a joint decree of three ministers for the development of PLTP Sarulla geothermal power plant will be issued this month so that the geothermal project could be started, Investor Daily reported on Wednesday.

The ministry?s director general of new and renewable energy Djajang Sukarna said in Jakarta on Tuesday that the government is currently settling the tax problem of the project to pave the way for the issuance of the decree.

The decree will be needed to provide a legal base for the transfer of Sarulla assets from Pertamina Geothermal Energy (PGE) to Sarulla Operation Limited (SOL) as the operator of the project. The consortium comprises Medco (37.5%), Kyushu Eleciric of Japan (25%), Itochu Corporation of Japan (25%) and Ormat International Inc of the United States (12,5%).

The joint decree also states that the upstream asset is controlled by Pertamina while the downstream asset is owned by the operator in accordance with the contract. In addition, the decree also allows the use of assets as collaterals to secure bank loans.

However, the joint decree could not be signed as expected because a problem related to tax income on the transfer of the assets. The energy ministry has asked for tax exemption from the finance minister, but no approval has so far been made.

Djajang said that the energy and finance ministries would soon discuss the tax exemption for the transfer of Sarulla assets.

Meanwhile, president director of Medco Power Fazil E Alfitri said that the operation of PLTP Sarulla geothermal power plant would be behind the schedule because of the late issuance of a joint decree and the tax problem.

He said that the first 100 MW unit of the power plant was expected to begin in 2015, a year behind the schedule. The first unit of the project was previously scheduled for completion in 2015, followed by the second and the third units in 2015 and 2016.

Despite the problem, Medco has appointed a contractor for the drilling of geothermal wells and for engineering, procurement and construction (EPC). ?At present, Medco is preparing the drilling works. The production well will be drilled in June, then work on the EPC,? he added. (*)