Pertamina and PLN agree to get geothermal energy project going

Jan 25, 2012 12:00 AM

Indonesian state-run companies Pertamina and Perusahaan Listrik Negara (PLN) have agreed to make Pertamina Geothermal Energy (PGE) as a joint subsidiary with 50:50 ownership to ease the way for Indonesia’s plan to deliver electricity from geothermal plants in 2014, a minister says.
State-Owned Enterprises Minister Dahlan Iskan said PLN and Pertamina would also issue joint debt papers or bonds to finance the Rp 10 tn investment needs for plants in the country.

President Susilo Bambang Yudhoyono unveiled a plan in 2010 to build 44 new geothermal plants to more than triple capacity to 4,000 MW by 2014. So far, the program has been in limbo because PLN as the sole buyer for the program has yet to agree on power purchasing agreements (PPAs) with developers.
“With this partnership, there will be no more long negotiations and the geothermal project will begin as soon as possible to be Indonesia’s reliable source [of power],” Dahlan told. “Previously, PLN and Pertamina’s talks were deadlocked. Pertamina wants high PPAs while PLN asks for low PPAs,” he added.

Pertamina and PLN are only expected to generate 340 MW of the 4,000 MW geothermal plant capacity, but Dahlan said relying on other investors, especially the foreign ones, could take longer and he therefore expected the two state firms to step in.
“We want this to get going as soon as possible. [Foreign investors] will take a long time to assess the investment,” he added.

Indonesia has 28,000 MW of geothermal energy potential reserves, which accounts for 40 % of the world’s geothermal potential energy. But the country is currently under-utilizing the renewable energy source, tapping into only 1,200 MW, barely 4.3 % of the overall potential.
The government is currently pushing efforts to diversify renewable energy sources to provide cheaper and more sustainable electricity for people who still experience blackouts in remote areas and small cities throughout the country.

Pertamina spokesman Mochamad Harun told that details on the partnership with PLN were still being discussed.
“A team will be set up to determine the model of the partnership between Pertamina and PLN as well as the future plans of PGE,” he said. “It’s a new idea from Pak Dahlan.”

The result of the team’s discussion would then be reported to the board of directors of each company and the boards would request approval from shareholders, Harun said, adding that the process would take “some time”.
PGE is 90 % controlled by Pertamina and 10 % owned by Pertamina Dana Ventura, and operates geothermal plants in West Java and North Sulawesi with a combined capacity of 272 MW as of 2010. The company is among the four state firms expected to carry out an initial public offering (IPO) this year to off-load a 20 % stake in PGE.

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