On 11 April 2013, the Ministry of Finance issued a Business Viability Guarantee Letter (BVGL) for the Sarualla geothermal power project company pursuant to Minister of Finance Regulation No. 139/PMK.011/2011 on PLN’s Business Viability. Following the signing of the Energy Sales Contract (ESC) and Joint Operation Contract (JOC) on April 4 this allows the Sarulla project to proceed with implementation, having been initiated on 27 February 1993 but later stalled due to the 1997 financial crisis.
Sarulla is a $1.6 billion 330MW geothermal power project located in the Sarulla region of the North Sumatra province. It will be implemented by the Sarulla Operations Ltd. (SOL) consortium that consists of PT Medco Power Indonesia (owned by Medco Energi Internasional Tbk), Itochu Corp., Kyushu Electric Power Co. Inc., and Ormat Technologies, Inc.
The amendments combined with the issuance of the BVGL enable the project’s $1.2 billion in debt financing to proceed. Japan Bank for International Cooperation (JBIC) is expected to provide 60%, Asian Development Bank (ADB) $250 million, and the remaining amount to be provided by commercial banks.
PT Pertamina Geothermal Energy (PGE), a subsidiary of PT Pertamina, is the geothermal concession holder and has provided SOL with right to use the geothermal field under the JOC. Indonesia’s state-owned electricity company, PT Perusahaan Listrik Negara (PLN) has entered into a 30 year electricity offtake agreement under the ESC.
The Sarulla project will be implemented in three phases of 110 MW each, with groundbreaking in 2014, the first phase scheduled to commence operations in 2016 and the remaining two phases within 18 months of the first phase.
Sarulla is a independent power producer (IPP) under the Second 10,000 MW Fast Track Program, which includes 4,000 MW of geothermal power. At 330 MW Sarulla is the largest single contract geothermal power project in the world and a core component of the Second 10,000 MW Fast Track Program. Its implementation follows the Muara Laboh and Rajabasa showcase geothermal projects that were signed in 2012, and the subsequent Rantau Dedap geothermal project that was also signed in 2012.
Lubis Ganie Surowidjojo represented the Indonesian Ministry of Finance.