Release: MedcoEnergi, Ormat and Itochu execute an agreement for Sarulla geothermal project

JAKARTA: August 20, 2007, PT Medco Energi Internasional Tbk (MedcoEnergi) is pleased to announce that its consortium, established with Ormat International, Inc. and Itochu Corporation (altogether called Consortium), today signed a Head of Agreement (HOA) of Sarulla Geothermal Project with PT PLN , the state-owned utilities company, and PT Pertamina, the state-owned oil and gas company, to expedite the finalization and formalizations the new Deed of Assignment (DoA), amendment of Energy Sales Contract (ESC), and Joint Operating Contract (JOC), including all relevant approval procedures.

 

The President of Republic of Indonesia, Dr. Susilo Bambang Yudhoyono, and the Japan Prime Minister, Shinzo Abe, witnessed the signing of the HOA which was executed by Eddie Widiono, the President Director of PLN, Ari Sumarno, the President Director of Pertamina, and the Consortium who were represented by Hilmi Panigoro, the President Director of MedcoEnergi, David Citrin as Vice President of Ormat, and Akira Yokota as the Executive Vice President of Itochu, during the Japan-Indonesia Business Forum.

 

The Sarulla Geothermal Project, which is located in Tapanuli Utara, North Sumatra , represents the largest single-contract geothermal project to date in the geothermal industry worldwide.  This is a reflection of the large scale and high productivity of Indonesian geothermal resources, as well as an indicator of the potential of the Indonesian geothermal power industry,” said Hilmi Panigoro, President Director of MedcoEnergi.

 

Background

The Consortium, with MedcoEnergi as the leader, has participated on the bid for the Assignment of Sarulla Geothermal Power Plant 300 MW held by PLN in December 2004, however the bidding was repeated on February 2005.  In April 2005, PLN announced that the Consortium was appointed as the preferred bidder but PLN requested the Consortium to resubmit the bid.  Accordingly, the Consortium resubmitted the bid in May 2005.

 

Finally, on July 25, 2006, the Consortium received a Letter of Intent (LoI) regarding the award on the Assignment of Sarulla Geothermal Power Plant 300 MW from PLN.  The LoI required the Consortium to discuss and finalize the new DoA, and amendment of ESC with PLN and Pertamina.

 

Forward Plan

The Sarulla Geothermal Project will be constructed over the next five years in 3 phases of 110 to 120 MW each.  The first power generating unit is expected to be operating within 30 months after the financial closing, while the remaining two units are scheduled to commence operation over a period of 18 months following the first unit. The power to be delivered to the project will serve as the base load of PLN’s North Sumatra dan Aceh grid system.

 

Pursuant to the submitted bid, Consortium shall:

1. Complete the development of the geothermal steam field;

2. Construct the field piping systems;

3. Construct the 3 (three) Ormat designed and supplied power plants with a combined gross capacity of 340 MW;

4. Own and operate the facilities and sell electricity to PLN under a 30-year ESC. 

The total project cost is projected to be approximately USD 800 million and it is expected that the Japan Bank International Corporation (JBIC) will provide the majority of the project financing based on Umbrella Note of Mutual Understanding signed between the Ministry of Finance of Indonesia and JBIC.

 

The project will be owned and operated by Consortium Medco Ormat Itochu under the framework of a JOC with the concession holder, Pertamina, through it subsidiary, PT Pertamina Geothermal Energy (Pertamina Geothermal).

 

In addition to the HOA, the Consortium and Kyushu Electric Power Co. , Inc.  executed a Memorandum of Understanding (MOU) on the same day. The MOU confirms the Kyushu Electric’s strong interest in participating in the Sarulla Project.

 

“Geothermal is one of the primary energy resources for the future and it is renewable.  This project will be a cornerstone for the company’s strives to diversify its energy resources portfolio,” Hilmi added.  While Aries Pardjimanto, the President Director of PT Medco Geothermal Indonesia (Medco Geothermal) said, “Sarulla Geothermal Project marks our commitment in developing renewable energy resources.  We are glad that we are able to assist the Government in providing additional power generation in North Sumatra and Aceh.”

 

Lucien Bronicki, Chairman and CTO of Ormat Technologies, stated, “We are pleased that the long cooperation with Pertamina, PLN and the teams of Medco and Itochu is approaching fruition.  Ormat’s air-cooled geothermal Combined Cycle technology, well proven over the last 15 years, is particularly suited to assure maximum utilization of the Sarulla resource in a sustainable manner. We pledge to continue our efforts to contribute to the development of this important renewable energy of by sharing our experience in constructing geothermal plants in 12 countries as well as the operating experience of the plants we own in the US, Nicaragua, Guatemala, Kenya, and the Philippines."

 

 

Akira Yokota, Executive Vice President of Itochu Corporation, said that “Itochu has been actively pursuing environmental renewable energy projects in several countries and geothermal power projects are also the area we have been truly focusing. has quite rich geothermal resources and we are very glad to have this valuable step in contributing to the further prosperity of the country of through Sarulla Geothermal Power Project using such environmentally friendly resources which owns.” (end of release)