Ormat Industries Ltd. (TASE: ORMT) subsidiary Ormat Technologies Inc. (NYSE: ORA) and its partners in Indonesia’s Sarulla Geothermal Project, Itochu Consortium (TSE: 80010) of Japan and Indonesia’s Medco Energi Internasional Tbk, have signed an interim agreement for the $800 million 340 megawatt (MW) project. Ormat is due to supply equipment and build the plant for an initial $200 million.
The interim agreement, calls a “Heads of Agreement” sets forth the milestones achieved in the contract negotiations and the parties' undertaking to expedite the contracts finalization and formalization, including all relevant approval procedures.
Ormat added that the Japan Bank for International Corporation (JBIC) is expected to provide the majority of the financing, on the basis of a memorandum of understanding (MOU) signed with Indonesia’s Ministry of Finance of Indonesia. Indonesian President Susilo Bambang Yudhoyono and Japan’s Prime Minister Shinzo Abe witnessed the signing.
Ormat owns 12.75% of the Medco-Ormat-Itochu Consortium, which will own and operate the Sarulla plant, located in northern Sumatra, and sell the electricity generated under a 30-year contract with Indonesian power company PT Perusahaan Listrik Negar (PLN) The Sarulla Geothermal Project will be built over the next five years. It will consist of three phases of 110 to 120 MW each, with the first power generating unit scheduled to commence operation within 30 months of the financial closing, and the remainder scheduled to commence operation over a period of 18 months following the first unit.
Power delivered by the project will serve the base load of PLN's North Sumatra-Aceh grid system.
The Consortium and Kyushu Electric Power Co. Inc. (TSE: 95080) also signed an MOU that confirms Kyushu Electric's strong interest in participating in the Sarulla Project. Kyushu Electric is one of the largest electricity utility companies in Japan and owns and operates a number of geothermal power plants in Kyushu.
Ormat notes that Indonesia has the world’s largest geothermal sources, with the potential of generating 20,000 MW. The country already produces 800 MW from geothermal sources. The company added that the Sarulla project is the largest single-contract geothermal project to date in the geothermal industry.
Published by Globes [online], Israel business news - www.globes.co.il - on August 20, 2007
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