Medco Power upbeat about nine big projects

JAKARTA. Power producer PT Medco Power Indonesia, controlled by Jakarta-listed PT Medco Energi Internasional and PT Saratoga Power, is set to pour US$1.3 billion into nine massive expansion projects.

The nine projects are a 3x110 megawatt (MW) Sarulla geothermal power plant in North Sumatra; two thermal power plants in Batam, Riau Islands, with a capacity of 30 MW and 70 MW; five mini-hydro power plants in West Java; and a 110 MW geothermal power plant in Ijen, East Java.

Medco Power president director Fazil Alfitri said on Tuesday that his company needed to spend around $120 million on the two Batam projects, around $100 million on the mini-hydro development projects and around $400 million on the Ijen plant.

Medco Power will partner with Itochu Corp., Kyushu Electric Power Co. and American company Ormat International Inc. in the Sarulla Operations Ltd. consortium for the Sarulla project, which has an estimated $1.5 billion price tag.

Apart from the Sarulla project, which will be the biggest in Indonesia, and the Ijen project, Medco Power is working alone in the seven remaining projects.

Medco Power has secured funding from state lender Bank Mandiri for the development of its Batam plants, while it is finalizing a funding agreement with local banks, including Mandiri, to support the five mini-hydro power plant projects.

With the huge amount of money needed for the Ijen project, Fazil said the company would mull partnerships. He said he expected the Ijen project to be completed by 2018.

“We have finished exploration works for the Ijen project and are preparing for the drilling of the first well next year. We have obtained all permits, including forestry[-related] permits,” he said.

For the Sarulla project, the Sarulla consortium recently secured $1.17 billion funding from Japan Bank for International Cooperation (JBIC), Asian Development Bank (ADB) and a consortium of commercial banks comprising Bank of Tokyo-Mitsubishi UFJ Ltd., ING Bank N.V., Mizuho Bank, Ltd., National Australia Bank, Société Générale and Sumitomo Mitsui Banking Corp. as Mandated Lead Arrangers.

Being the biggest shareholder in the Sarulla consortium with 37.25 percent, Medco Power will contribute around $558 million to the project.

“The EPC [engineering, procurement and construction] phase will start in May or June. Our target is to see the first phase of development — the first 110 MW unit — start operation in June 2016,” Fazil said.

The Sarulla geothermal power plant is expected to help the government lessen the power crisis in the northern part of Sumatra.

State-owned electricity company PT PLN senior corporate communications manager Bambang Dwiyanto said earlier that demand for electricity in northern Sumatra peaked at 1,600 MW, which exceeded the company’s ability of 1,400 MW.

As of the end of 2013, the country has electricity generation capacity of 47,128 MW.

With electricity demand growing due to economic growth, capacity must be upped by 6 gigawatts (GW) every year during the 2013-2022 period.

The government is calling for more utilization of non-fossil fuel to generate electricity to meet growing demand. Currently, power is mostly generated from fossil fuel despite the abundant renewable resources of solar and geothermal energy.

Around 40 percent of global geothermal potential capacity lies in Indonesia but development remains low. (Raras Cahyafitri)