Medco-led consortium wins N. Sumatra geothermal project

Reno-based firm Ormat Technologies, Inc. announced on Monday that a consortium consisting of its wholly-owned subsidiary, Ormat International, Inc., a unit of Medco Energi Internasional Tbk., and Itochu Corp. of Japan, has been declared the winner of a tender issued by the state electricity firm PLN (Persero) for the development of the Sarulla, North Sumatra geothermal power project on an independent power producer basis.

Medco is the leader of the Consortium, whose bid consisted of the completion of the development of the geothermal steam field, construction of the field piping systems and three ORMAT designed and supplied power plants with a combined gross capacity of 340 MW, owning and operating the facilities and selling electricity to PLN under a 30-year Power Purchase Agreement (PPA) expected to be concluded within 4 months.

The total project cost is projected to be about US$600 million.

Ormat's specific responsibilities include the supply of the power plant and setting up and supervising the operations and maintenance of the plants, which will utilize its technology and equipment. The value of Ormat's scope of work for the supply of power plant equipment is expected to be approximately one third of the total project's cost. Release of the supply contracts to Ormat will be made upon the financial closing of the transaction, expected to be 12 months from the effective date of the PPA.

The Sarulla project is to be constructed over the next five years in 3 phases of 110 to 120 MW each, with the first power generating unit to be operational within 30 months and the last within 48 months from the financial closing.

Power delivered by the project will serve the base load of PLN's North Sumatra - Aceh grid system. Upon the completion of the third phase, the expected annual revenue from electricity sales under the PPA will be approximately $110 million.

The project will be owned and operated by an Indonesian special purpose company (SPC) that will be established by the Consortium members under the framework of a Joint Operating Contract with the concession holder, Pertamina (the state-owned oil and gas company). In addition to its responsibilities as the project's power plant equipment supplier and for supervision of operations and maintenance, Ormat will participate as a minority shareholder in the SPC.

The Sarulla Geothermal Working Area is one of Indonesia's largest and potentially most productive geothermal sites. It consists of four distinct reservoirs, two of which the Consortium plans to develop to achieve the project's power capacity under the bid. The SPC shall have an option to further expand the capacity at a later stage. Several geothermal production wells supporting generation of more than 100 MW have already been drilled in the two areas to be developed.(alex)