The Medco-Ormat-Itochu-Kyushu consortium, which includes Ormat Technologies Inc. (NYSE: ORA), has signed the Sarulla Project Joint Confirmation with state-owned Indonesian power company PT Perusahaan Listrik Negara on the terms for amendments to the energy sales contract.
The parties changed the price of power sold under the energy sales contract to $0.0679 per kilowatt/hour. The tariff will be higher in the first few years, and lower in the later years of the project.
The original energy sale contract for the 330-megawatt Sarulla geothermal power station in North Sumatra Province of Indonesia was signed in December 2007. The power plant will be built in three stages, with Ormat providing the 110-120 megawatt combined cycle geothermal plants. The first stage of the power stage is scheduled to be built within 30 months of the financial closing.
The other members of the consortium are Indonesia's Medco Energi Internasional Tbk, and Japan's Itochu Corporation (TSE: 8001) and Kyushu Electric Power Co. Inc. (TSE: 9508). Ormat has a 12.75% of the project and will supply the power plant equipment, amounting to more than $300 million. The total project cost is estimated at $1 billion, above the original estimate of $600 million.
Clal Finance analyst Yuval Ben-Zeev said, "Bottom line, this is step forward for the company, but it will take time before we feel its effect. This is one of the largest geothermal projects in the world, and unquestionably an important project for the company." He adds that the project's budget has overrun because the price of electricity is higher than originally estimated, but he believes that "the project will generate a handsome profit for the developers."
Ormat Technologies is controlled by Ormat Industries Ltd. (TASE: ORMT). Ormat Technologies' share closed at $31.12 in New York yesterday, giving a market cap of $1.41 billion. Ormat Industries' share price rose 2.1% by midday today on the TASE to NIS 30.80, giving a market cap of NIS 3.58 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on April 26, 2010
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