Ormat expects $254 million equipment revenues for Sarulla project

Ormat expects $254 million equipment revenues for Sarulla project Muara, Lake Toba, Tapanuli Utara, North Sumatra, Indonesia (source: flickr/ Max Grabert, creative commons)
Alexander Richter 4 Apr 2013

Ormat Technologies reports that the JV working on the 330 MW Sarulla project in North Sumatra, Indonesia, has signed joint operating contract and energy sales contract. Ormat expects revenues of $254 million in equipment sales from the project.

In a release yesterday, Ormat Technologies, Inc. announced “that Sarulla Operations Ltd. (SOL) has signed a Joint Operating Contract (JOC) and Energy Sales Contract (ESC) for the 330 MW Sarulla geothermal power project in Tapanuli Utara, North Sumatra in Indonesia.

Ormat participation in this project includes two roles. Ormat designed the plant and will supply its Ormat Energy Converters to the power plant. In addition, Ormat, through its subsidiary Ormat International, Inc., holds a 12.75% equity stake in SOL, which owns and operates the Sarulla project.  As a supplier, the company expects to recognize revenues of $254 million related to the equipment sales over the construction period. Other members of the consortium that owns SOL include Medco Energi Internasional Tbk (Medco); Itochu Corporation (Itochu); and Kyushu Electric Power Co. Inc (Kyushu).

Under the JOC, PT Pertamina Geothermal Energy (PGE), the concession holder for the project, has provided SOL with the rights to use the geothermal field and under the ESC PT PLN, the state electric utility will be the off-taker at Sarulla for 30 years.

The Sarulla project is the largest single contract geothermal power project to capitalize on the large scale potential of highly productive Indonesian geothermal resources. The project will be implemented in three phases of 110 MW each, utilizing both steam and brine extracted from the geothermal field to increase the power plant’s efficiency.

The Ormat technology was selected for this project as it’s maximize the efficient use of varied composition of geothermal fluid, which in this case includes steam, brine and gases.  In addition Ormat’s technology allows practically 100% reinjection of the geothermal fluid back into the reservoir, maintaining the sustainability of the geothermal resource thus increasing power and mitigates the negative effect of gases.

The consortium has started preliminary testing and development activities at the site. Construction is expected to begin after the consortium obtains financing, which is expected to take approximately one year. The first phase is scheduled to commence operation in 2016. The remaining two phases are scheduled to start within 18 months of the first phase.

The project is expected to obtain construction and term loans under a limited recourse financing package of direct loans from the Japan Bank for International Cooperation (JBIC) and the Asian Development Bank (ADB), as well as loans to be provided by five commercial banks (the MLAs). The MLAs are expected to be backed by political risk guarantees from JBIC.

Dita Bronicki, Ormat’s Chief Executive Officer, stated: “After a long process of negotiations, we reached an agreement on the amendments to the JOC and ESC agreements that were required for the bankability of the project. Once the financing closes, we will be able to recognize revenues from the supply of the equipment over the construction period and further strengthen the performance of our Product Segment. This project, represents our entry into Indonesia, a region we have been excited about for some time,  We believe the potential opportunity in  Indonesia is significant, and we look forward to pursuing opportunities in what we anticipate will be a growing market in the years to come. I would like to thank Pertamina, PGE, PLN and our partners for their confidence in our technology.”

Source: Ormat release via Yahoo