Indonesia province offers $1.4 bln geothermal projects

Reuters, Wed Dec 23, 2009 10:37am GMT

JAKARTA, Dec 23 (Reuters) - Indonesia's West Java province is offering three geothermal projects requiring $1.4 billion of investment to be financed under a public and private partnership scheme, an official at the planning ministry said on Wednesday.

The government has launched two crash programmes to increase power generation because Southeast Asia's biggest economy faces chronic power shortages after years of under investment.

The first 10,000 megawatt programme relies on coal-fired power plants, while nearly half of a second 10,000 MW programme, due to start next year, will come from geothermal sources.

"The IFC (International Finance Corporation) may help with the feasibility studies as long as the terms are clear," said Bastary Pandji Indra, a director at the ministry in charge of projects under public-private partnership.

The IFC, the private arm of multilateral lender the World Bank, could also provide further financing for investors who win tenders, Indra added.

The geothermal projects being offered are Gede Pangrango with a potential capacity of 210 MW, Sangkan Hurip with 100 MW and Papandayan with 160 MW.

The government has in recent years sought to attract more investment by partnering with private firms, usually with authorities freeing up land and private firms financing most of the construction.

A second director at the planning ministry, Monty Girianna, who is in charge of mineral and natural resources, said investors were likely to be interested in the projects provided locations were free of any land disputes and it was clear how much state power firm PT Perusahaan Listrik Negara (PLN) would pay for the electricity.

An official at the mines and energy ministry said earlier this month that PLN would open tenders to buy the electricity from geothermal developers using a ceiling price of 9.7 U.S. cents per kilowatt hour, more than double the 4 U.S. cents per kwh currently, in a bid to lure investors.

Indonesia, with hundreds of active and extinct volcanoes, has the potential to produce an estimated 27,000 MW of electricity from geothermal sources.

However, most of the potential remains largely untapped because the high cost of geothermal energy makes the price of electricity generated this way expensive.

Nonetheless, local energy firms Medco Energi Internasional (MEDC.JK) and Star Energy, are looking at making new investments, while Chevron (CVX.N), the world's largest private producer of geothermal energy, has previously said it plans to double its geothermal business in Indonesia and the Philippines by 2020.

(Reporting by Dicky Kristanto, Sonya Angraini and Andreas Ismar; Editing by Ed Davies)