Velcan divests Sukarame hydro power project
Friday, December 22 2017 - 02:10 AM WIB
Luxembourg-headquartered power company Velcan SA, which develops power plants in emerging economies, said it has fully divested its Sukarame hydropower project (7 MW located in Indonesia?s Lampung Province), and sold it to an Indonesian independent power producer.
Velcan said in a statement on Thursday that since March 2016, the construction of the project was on hold due to acute tariff uncertainties and power purchase agreement (PPA) unavailability. The Group had started in late 2015 the pre-construction activities, after an increase of the feed-in-tariff (US$132 /MWh for the first 12 years, and $82.5 for the remaining 8 years), decided by the Ministry of Energy and Mineral Resources.
?However, PLN (the state owned electricity company and sole authorized buyer in Indonesia) has refused to comply with this regulation and to buy the power, claiming that such new FIT (feed in tariff) was too high,? the company said.
It said that policy discussions have been going on and have resulted in August 2017 in a new tariff, which is now to be negotiated with PLN, and subject to a ceiling of 100 percent of the provincial BPP, which is PLN?s local procurement cost. In the West Lampung Regency, where the project is located, such BPP ceiling is of Rp 1,034 per kWh (7.6 US cents as current exchange rate). That means the maximum tariff for the Sukarame Project that can be negotiated with PLN is US$ 76 / per MWh, barely 60 percent of the tariff based on which the investment decision was initially taken, Velcan said.
The Sukarame project costs were already fully impaired as on 31st December 2016. The sale price, which is to remain confidential at this stage, allows only a partial recovery of such costs, given the low IRRs forecast resulting from the new tariff.
?The small size of the Group?s portfolio in Indonesia (now only the Redelong Hydropower project of 18 MW) does not economically justify having full operations in the country, and the Group is having discussions with potential partners and investors for taking over the lead development in the Redelong project,? Velcan said.
Editing by Reiner Simanjuntak