PLN to take over Sarulla geothermal project

State electricity firm PT PLN (Persero) has decided to take over development of Sarulla geothermal power plant in North Sumatra as is considers current operator is unable to carry out the project.

?BoD meeting on Tuesday May 31, 2011 has concluded that physical construction of the project will be started by year-end,? PLN said in a statement.

?PLN has concluded negotiation with investor but the investor is unable to conclude negotiation with other related parties and therefore stalling this prospective project,? the statement said, adding that PLN has taken steps to enable construction start by year-end.

Sarulla is currently operated by a consortium that consists of IDX-listed energy firm PT Medco Energi Internasional Tbk (37.25%), US firm Ormat Technologies Inc. (12.75%), and Japanese firms Itochu Corporation (25%) and Kyushu Electric Power Co. Inc (25%)

The Sarulla has potential to generate at least 330 MW of electricity with investment estimated at US$1 billion.

PLN took over the Sarulla geothermal project from US firm Unocal Corp for $60 million in 2004 after the financial crises that hit Indonesia in 1999 crippled IPP projects. PLN then put the project on tender under IPP scheme with Medco-led consortium came out as winner with price offer of 4.67 US cents per kwh.

The consortium then asked for price renegotiation, citing for increase in construction costs and reached agreement in 2010 of levelized price of 6.69 cents per kwh.

Ormat said in April 2010 that the majority funding for the project will come from Japan Bank for International Cooperation (JBIC).

An industry source told Petromindo.Com that the consortium was unable to move the project into construction due to some ?disagreements? between members.(godang)