Sarulla project to commence construction in the spring of 2014

Sarulla project to commence construction in the spring of 2014 Muara, Lake Toba, Tapanuli Utara, North Sumatra, Indonesia (source: flickr/ Max Grabert, creative commons)
Alexander Richter 3 Dec 2013

Having signed a term sheet on financing for the Sarulla project in Indonesia, the JV partners Ormat, PT Medco Energy, and Japanese Itochu and Kyushu Electric plan the start of construction activities in March 2014.

The Sarulla project is expected to start construction work as early as March 2014.

Fazil Alfitri, president director of PT Medco Power Indonesia, which has a 37.25 percent participating interest in the consortium — Sarulla Operations Ltd. — that holds a contract of work (CoW) for the geothermal project, said several other infrastructure projects were now on the way to support the plant.

“The EPC process [engineering, procurement, construction] for the power plant itself has not been completed. It will likely start in March or May next year. However, we have started the engineering work on roads and bridges,” Fazil said.

“The funding is also in place. We have signed a term sheet agreement. We hope that the financial part can be closed in March,” he added.

The Sarulla geothermal power plant, which is expected to generate three by 110 megawatts (MW) of electricity, was initiated in 1990. However, development was stalled over various issues, including shares and contract ownership.

After prolonged delays, the plant’s development moved forward after the Finance Ministry issued a warrant for operation feasibility to Sarulla last April. At the same time, the Energy and Mineral Resources Ministry also renewed an energy sales contract, which set the price of electricity to be produced by the plant at 6.76 US cents per kilowatt hour (kWh).

Energy and Mineral Resources Minister Jero Wacik previously said that he expected the financial closing of the project to be completed before year-end.

Development of the Sarulla geothermal plant will require investment of US$1.5 billion. About $1 billion of the costs will be funded by loans from the Japan Bank for International Cooperation (JBIC) and the Asia Development Bank (ADB), according to Fazil.

To realize the project, Medco Power, which is 51 percent owned by private equity firm Saratoga Capital and 49 percent owned by Jakarta listed PT Medco Energy Internasional, is collaborating with Japan’s Itochu and Kyushu Electric and US-based Ormat Technologies Inc.

The first of the plant’s units is scheduled to be completed in June 2016, while a further two units are expected to be completed in July and December 2017, respectively.

Source: Jakarta Post