Australia to Help 300,000 Children Go to School

Jakarta Post, September 30, 2011

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The Australian Government has signed an agreement to disburse 210 million Australian dollars to the Indonesian Government to build schools.

Through this education partnership, up to 2,000 junior secondary schools will be built in poor and remote areas where they are most needed, according to a release sent by AusAid to the Jakarta Globe.

The program builds on the highly successful Australia - Indonesia Basic Education Program which built more than 2,000 schools between 2006 -2010.

“Education is a fundamental human right and critical for individuals to lift themselves out of poverty. This new education partnership will enable a further 300,000 Indonesian children to attend school,” said Australia ’s Ambassador to Indonesia , Greg Moriarty.

The two governments are working together to achieve Indonesia’s goal of providing nine years of basic education for all Indonesian girls and boys, regardless of their gender, where they live or how much their family earns.

“Better educated children result in a more productive workforce. Better educated girls lead to lower child and maternal mortality, improved child nutrition and stronger political participation,”  Moriarty said. 

 This assistance is part of the $500 million five-year Education Partnership announced by Australian Prime Minister Julia Gillard and President Susilo Bambang Yudhoyono in Jakarta in late 2010.

The schools will be constructed by local communities, using local labour, equipment and materials and each will include facilities for the disabled and separate toilets for boys and girls.

The Education Partnership will also improve school management through training provided to 293,000 school principals, school supervisors and district education officials.

Unilever invests Rp 1.1t in N. Sumatra

The Jakarta Post, Jakarta, Thu, 09/29/2011

Multinational company, Unilever, is planning to open a palm-processing plant in Semangke, North Sumatra with a total investment of Rp. 1.1 trillion (US$122 million).

“Unilever is developing a new facility in Semangke, North Sumatra. It is a Fatty Acid Oil Chemical plant,” Investment Coordinating Board Chief Gita Wirjawan said on Thursday as quoted by Antara news wire.

Gita was among ministers who accompanied President Susilo Bambang Yudhoyono in welcoming Unilever top officials at the State Palace on Thursday.

Visiting Unilever top officials included Chairman Michael Treschow; CEO Paul Polman; Chief Supply Chain Officer Pier Luigi Sigismondi; President Director of PT Unilever Indonesia Tbk Maurits Lalisang, and Corporate Secretary Sancoyo Antarikso.

Gita said it would take two years to finish the new facility.

Gita said the company was also committed to investing US$600 million for its expansion in Indonesia.

“It has a number of plants in Java. It accepted our suggestion to build plants outside Java,” he said.

The company will cooperate with 10 firms to invest 50 million euro in Nusa Tenggara.

RI gets US$500,000 in assistance from ADB

Esther Samboh, The Jakarta Post, Jakarta, Mon, 09/19/2011

The Asian Development Bank (ADB) has announced plans to channel grants and loans to improve the Indonesian government’s capacity in developing infrastructure projects through public and private partnership (PPP).

“The technical assistance, amounting to US$500,000, provided by the government of Japan through the Japan Fund for Poverty Reduction (JFPR) will support the government in preparing PPP projects that are economically sound, financially attractive to private sector financiers and affordable to the government,” the Manila-based regional development lender says in a statement released Monday.

The technical assistance is planned to be implemented in 2011, with the National Development Planning Agency (Bappenas) as an executing agency and Sarana Multi Infrastruktur

state infrastructure fund manager being responsible for implementing the activities.

ADB’s technical assistance program is aimed at assisting developing countries in planning and executing projects that it finances with grants and loans, its website says.

“This will support the government’s objective in increasing the number and value of commercially attractive and sustainable PPP projects offered to the private sector,” ADB's principal infrastructure specialist Bob Finlayson said.

The government is seeking to mobilize about $140 million worth of investment in infrastructure over the next five years, of which 60 percent is to be sourced from the private sector. While the government has developed a number of PPP projects, they have not attracted significant market interest due to concerns over project design, preparations and implementation, the ADB statement says.

RI, China ink US$6b deal for SE Sulawesi nickel smelter

Esther Samboh, The Jakarta Post, Jakarta, Mon, 09/19/2011

Chinese representatives on Monday signed an agreement with Indonesian officials to invest US$6 billion in a nickel smelter in Southeast Sulawesi.

Jilin provincial government’s Jilin Horoc Nonferrous Metal Group Co Ltd will develop the nickel smelting industry in Bombana and North Konawe regencies of Southeast Sulawesi and work with local firm Billy Indonesia with operations starting next year.

“First of all, mining materials should be processed domestically — no more raw material exports. Secondly, there will be job creation for thousands of people,” Coordinating Economic Minister Hatta Rajasa said after witnessing the agreement by representatives and officials of the related firms, regencies and provinces.

Hatta and Investment Coordinating Board (BKPM) chairman Gita Wirjawan said they expected the project to have a multiplier effect on the regencies’ economies and create jobs for local residents.

PT KAI receives US grant to upgrade railway signal system

The Jakarta Post, Jakarta, Thu, 09/15/2011

State railway firm PT KAI on Thursday announced that it had received a grant worth Rp 5.2 billion (US$598,000) from the US Trade and Development Agency (USTDA) to be spent on a strategic plan development study to improve its telecommunication and signaling system.

The grant was handed by US Ambassador to Indonesia Scot Marciel to PT KAI chief director Ignasius Johan, in Bandung on Thursday.

The railway signal system, operated by the train travel chief, is a guide for train drivers, telling them when to start trains, when to stop them and when to travel at certain speeds.

PT KAI signals, telecommunication and electricity deputy chief Ira Nevasa said the company hoped the study would result in a safer, more efficient and better quality operating procedure.

Jakarta Turns to Dutch Experts for Sea Dike Plan

Jakarta Globe, Dofa Fasila, September 14, 2011

The Jakarta administration is receiving help from the Rotterdam authorities in preparing a master plan for a massive sea dike that will help the capital deal with its perennial flood problems.

Jakarta Governor Fauzi Bowo, speaking after receiving the Dutch technical assistance team, said preparations for the plan would take about nine months.

Completing the plan, he added, would likely take two years, and implementing it would take at least a decade.

“We hope this project can proceed, and not be delayed, because it will really determine the future of Jakarta,” Fauzi said.

The Indonesian team spearheading the endeavor will also involve the Public Works Ministry and the National Development Planning Board (Bappenas), Fauzi said.

The same team completed a study, the Jakarta Coastal Defense Strategy, in May. The study foresees the need for the giant sea wall to be built off the coast of Jakarta by 2025.

The massive sea wall, besides helping Jakarta cope with flooding, will also fortify the city’s water supplies, long a problem in the capital, Fauzi said.

“The emphasis in the building of this giant sea wall as part of the Jakarta Coastal Sea Defense project is not only to safeguard the northern coastline of Jakarta but also to make use of this project in an integrated manner for the future benefit of the city,” Fauzi said.

The giant sea wall, he said, will also serve as a reservoir to collect water from several rivers running through Jakarta.

“It is planned that water from 13 rivers in Jakarta ... will in the future not just be left to flow into the ocean. We will collect the water within the giant sea wall so that it can become a primary source of water for the city. This is in the long term,” Fauzi said.

To deal with a possible water shortage while the wall is being planned and built, Fauzi said city authorities would accelerate a pipeline plan to link Jakarta with the Jatiluhur reservoir in Purwakarta, West Java, and plan a desalination plant. The governor has previously referred to the plant a decades-long project.

The pipe network from Jatiluhur, the desalination plant and the reservoir formed by the giant sea wall would buttress the city against floods and protect it from water shortages, Fauzi said.

The giant wall has become increasingly urgent as land subsidence in Jakarta has worsening while sea levels have risen, he added.

Officials in Rotterdam, home to one of the world’s largest ports, have substantial experience in protective construction. Sitting below sea level, the city is built mostly behind dikes.

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Geothermal Investors Want Additional Government Guarantees

Jakarta Globe, Ririn Radiawati Kusuma, September 14, 2011

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Indonesia’s ambitious plan to boost power capacity by 10,000 megawatts in three years might be in jeopardy because of additional geothermal investor demands, an executive said.

The government issued a regulation early this year that stipulated state-owned Perusahaan Listrik Negara would buy electricity from geothermal power plants at less than $9.70 per kilowatt hour but at a rate higher than for coal.

The finance ministry then issued a ruling that would back PLN’s financial condition should PLN face bankruptcy.

But investors aren’t satisfied with the decrees and want a promise that PLN will buy geothermal energy in any price, said Saunusi Satar, vice president for external affairs of Star Energy, on Wednesday.

“We have done the exploration activities which involves a lot of risk. We demand a full guarantee in all of our geothermal activities,” Sanusi said. “PLN should buy power at any price.”

Geothermal plants that face possible construction delays include Supramu Energy, Star Energy, Bakrie Power, Tata Power, and Golden Spike.

Sanusi explained that the companies would not start drilling into the geothermal well until the demands are met.

Star Energy has set aside $210 million to invest in Wayang Windu unit 2, with capacity of 227 megawatts, from the geothermal block in West Java, Sanusi said, and moving from the exploration stage to power production takes approximately four to five years.

“It may be completed after 2015, I think,” Sanusi said, meaning the government’s 2014 goal will not be met.

The government’s 2014 power plan includes 4,000 megawatts from geothermal sources.

Muhammad Sofyan, head of renewable energy division at PLN, said that private companies should not be worried with PLN’s ability to purchase power.

“We are committed to buying the power from geothermal power plant,” Sofyan said, adding that PLN also plans to boost geothermal as the second biggest energy source by 2020.

Toyota Toots Its Horn Over Massive New W. Java Plant

Jakarta Globe, Faisal Maliki Baskoro, September 13, 2011

Toyota chief executive Akio Toyoda arrived in style in Jakarta on Tuesday,
posing beside an orange 1977 Toyota Kijang, a popular model during the
company’s four decades in Indonesia. (AP Photo/Achmad Ibrahim)    

          

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Toyota’s supply chain may have been hit by the impact of the March tsunami in its home country of Japan, but the automotive maker is pushing ahead with expansion plans abroad, including in Indonesia.

Visiting the archipelago to mark 40 years of Toyota’s presence here, Akio Toyoda, the company’s chief executive, formally announced its plan to build a second plant in West Java.

Toyoda met Indonesia’s president and vice president on Tuesday, as well as an Industry Ministry official, to provide details of Toyota’s Indonesia plans.

“Our expansion plan shows our commitment to Indonesia,” Toyoda said, after briefly driving an orange 1977 Toyota Kijang, once the company’s most popular model.

Toyoda said Indonesia had become a focus of investor attention and a leader among developing nations as economies in Japan and Europe were clouded by economic crises.

Despite global production plans being disrupted by the March 11 earthquake and tsunami, Toyoda said that by June, Toyota had recovered “100 percent,” ahead of initial projections.

This was “thanks to the hard work and support of our people and thanks to the support from other countries like Indonesia,” he said.

Toyota announced it would build its second factory in a 76,000-square-meter facility next to its existing plant in Karawang, 60 kilometers east of Jakarta.

Toyota increased its investment to Rp 2.9 trillion ($336 million) from the Rp 1.7 trillion it committed in March in a sign of the growing automotive demand in Indonesia.

The factory is expected to be completed by 2013 and add 70,000 units of annual production capacity. Toyota is also keen to boost the local content of its cars and hopes the factory will generate 15,000 jobs.

Toyota expects to boost its exports from Indonesia, which last year represented 42 percent of its 107,000 unit output in the nation.

Toyota leads the market in Indonesia with a 37 percent share. Toyoda attributed that success to the Kijang, a family van.

“It’s the road that makes the car. Making cars that suit the characteristics of Indonesian roads is our way to catch our customer,’’ Toyoda said.

The Toyota Kijang has been sold in Indonesia for three decades. “Together with the Kijang Innova, these two models are our stars,” Toyoda said.

Johnny Darmawan, the president director of local distributor Toyota Astra Motor, said the trend in Indonesia was toward multipurpose vans to accommodate families, while there was also likely demand for a low-cost hatchback.

“We are also looking to export some of the cars produced in the new plant, but our priority is still satisfying the local demand,” he said.

Johnny said Toyota and the government were still in talks over tax incentives, but that infrastructure such as ports was more important.

Edwin Sebayang, the head of research at MNC Securities in Jakarta, said Indonesia’s growing economy and easy financing would drive car sales.

“It’s not surprising at all that automotive companies are posting high revenues with high margins,” he said.

Nestle Begins Construction of $200m Factory in Indonesia

Jakarta Globe, September 13, 2011

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Geneva. Swiss food giant Nestle said on Monday it began construction of a $200 million (146.7 million euros) factory in Indonesia which will produce infant cereals, chocolate malt drinks and milk powder.

“Our decision to invest USD 200 million in Karawang is consistent with the growth in demand and our confidence in the rapidly developing economy of Indonesia,” Arshad Chaudhry, President Director of Nestle Indonesia said in a statement.

The factory in the town of Karawang, West Java, will create over 600 jobs and is expected to open in early 2013, the company added.

Agence France-Presse

Goldman, Morgan in Talks to Buy Indonesian Brokers: Sources

Jakarta Globe, September 12, 2011

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Goldman Sachs and Morgan Stanley are each in talks to buy an Indonesian brokerage firm to expand their reach into the booming capital market of Southeast Asia’s biggest economy, sources said.

Goldman is in talks to buy Tiga Pilar Sekuritas and expects to complete the acquisition before the end of 2011 as it aims to start a local brokerage operation next year, two sources with direct knowledge of the deal told Reuters on Monday.

Goldman does not have an underwriting or broking license in Indonesia, while Morgan Stanley secured an underwriting licence in 2008, but is seeking a bigger presence through a full-fledged broker license.

Both banks plan to add research analysts as well as sales and trading staff to the brokerages next year, while Goldman could also add investment bankers, as they seek to win fees from equity offerings and debt deals, the sources said.

“I think this signals a positive view on our capital market ... It has really become an important destination for global investment banks,” said Winston Sual, who manages nearly $1 billion in funds at Panin Sekuritas in Jakarta.

“This will give more competition for fees among global bankers like JPMorgan and Credit Suisse.”

The banks’ plans in Indonesia, which has seen its stock market hit records this year on surging foreign investment, follow moves by Nomura Holdings and Citigroup to ramp up equity research teams in Jakarta this year to challenge leaders Credit Suisse and Deutsche Bank.

Investment interest in the G20 member is set to rise again next year, when Indonesia hopes to get an upgrade by Fitch Ratings to an investment grade sovereign rating that will put it alongside top emerging BRIC nations such as Brazil. 

Goldman has completed due diligence for Tiga Pilar and both parties are now negotiating the deal structure and valuation, said one of the sources, who all declined to be identified.

“Goldman has already asked Tiga Pilar to start looking for prospective staff and bankers as a precondition before they complete the deal,” said the source. No financial details were immediately available.

Officials at Tiga Pilar and Goldman declined to comment.

The Tiga Pilar deal size is likely to be small as Goldman is only seeking to buy the operating licenses that the deal will provide. It will need to at least inject the Rp 50 billion ($6 million) in license costs and required brokerage capital.

Tiga Pilar, partly owned by the family of Tan Pia Sioe, traded Rp 445 billion by stock value in the first six months of this year, ranking it 102 out of 117 active brokerages, according to stock exchange data.

The IDX composite index has jumped over 5 percent so far this year, topping the list of gainers in Southeast Asia. 

Goldman’s rival Morgan Stanley has also identified a target brokerage firm to acquire and hopes to conduct due diligence this year in order to start operations next year, said three other sources with direct knowledge of this deal.

“Talks are ongoing. It is still early to mid-phase. Morgan Stanley is talking to people,” said one of the sources. Sources declined to give the name of the target brokerage and no financial details were available.

A Morgan Stanley spokesman declined to comment. The talks are aimed at either buying a brokerage to get their seat on the stock exchange or to buy a seat from an existing brokerage, one of the sources said.

A full broking license would allow the firm to cover the secondary side of sales and trading as well as research, the source added.

Citigroup bought Indonesian brokerage Republik last year and this year added bankers and analysts, including veteran analyst Ferry Wong from Macquarie as its new head of research.

Citi was not in the top five for underwriting Indonesian equity deals last year but this year has surged up the league table to rank second among global banks, behind Deutsche.

Reuters

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Toyota to build new factory in Indonesia-Nikkei

Reuters, Sept 9, 2011

(Reuters) - Toyota Motor Corp plans to spend nearly 30 billion yen($387.8 million) to build an assembly plant in Indonesia that it hopes to launch in the first half of 2013, the Nikkei business daily reported.

The plan calls for nearly doubling the firm's capacity in that country to about 200,000 vehicles a year, the paper said.

The decision comes after three years of holding off judgement on any plant construction in Japan and abroad, said the business daily.

Japan's leading carmaker seeks to maintain its lead in Indonesia, which is set to become Southeast Asia's largest auto market, the Nikkei said.

The new facility will be built adjacent to its existing factory in the Jakarta suburbs of Karawang and is expected to assemble three subcompact models, including a low-priced strategic vehicle under development for that country, the paper reported.

Last year, auto sales in Indonesia was around 750,000 units, approaching Thailand's roughly 800,000, with the number seen exceeding 1 million units in the coming years, the paper said.

Toyota controls about 60 percent of the Indonesian market when contributions by group firms such as Daihatsu Motor Co are included. But as competition grows with Nissan Motor and Suzuki Motor announcing plans to boost output, Toyota aims to improve cost competitiveness through increased local production, the Nikkei reported.           

(Reporting by Sumit Jha in Bangalore;Editing by Sriraj Kalluvila)

Freeport familiarizing Jayapura schoolers with environmental awareness

Antara News, Thu, September 8 2011

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Jayapura, Papua (ANTARA News) - PT Freeport Indonesia in cooperation with the Jayapura City administration is conducting a program to familiarize local primary and secondary school students with environment-related subjects under the theme "Towards Environmentally Aware Schools."

The head of the PT Freeport Indonesia representative office, Anthon Raharusun, said here Wednesday the program was a manifestation of the company`s constant attention to the environment and part of its efforts to work in partnership with local stakeholders.

"We have been doing a lot of cooperation with various parties as well as local administrations and private sectors, not only in Papua but also throughout Indonesia, especially in terms of environmental problems. Because PT Freeport Indonesia is concerned about the environment," he said.

He also hoped the cooperation with the Jayapura city administration can be done continuously in the future, not just familiarization for schools but also for regional task force units.

"All parties who wish to conserve the environment can cooperate with Freeport," he said.

The supervisor for environmental awareness and education of PT Freeport, Jimmy Rumainum, said the environmental awareness familiarization program for primary and junior high school students was also aimed at creating an environment-based school (locally named Adiwiyata).

"The activity itself in Jayapura city is still in its early stage but in Mimika district and several other areas in Papua it was in an advanced stage. In fact, in Mimika there is already an Adiwiyata school," he said.

Meanwhile, the vice mayor of Jayapura city, Nur Alam, on behalf of the city administration welcomed the concept of cooperation and initiatives offered by PT Freeport Indonesia.

Moreover, the administration has outlined the Five-Year Development Program (2011-2016) of Jayapura City, among others, the Clean and Beautiful City, and Lighting the City in the night.

"Many things can be supported by PT Freeport as a world class company. We hope the activities that give positive values ​​such as this can become a sustainable program," he said.

The Freeport program is highly synergistic with Jayapura city administration`s work program, so it can join hands to save the environment in Jayapura city area," he added.

Editor: Jafar M Sidik

French Miner Eramet to Invest $450m in Halmahera Nickel Project

Jakarta Globe, Camelia Pasandaran, September 07, 2011

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In a move expected to give eastern Indonesia an economic boost, a French mining group plans to invest in a nickel mining project in North Malaku.

“Eramet will have spent around $450 million on this project before the final investment decision,” Eramet’s chairman and chief executive officer, Patrick Buffet, said on Wednesday after meeting with President Susilo Bambang Yudhoyono.

The $450 million is part of the first phase of a $6 billion investment that would develop a nickel and cobalt mine as well as a processing plant on North Malaku’s Halmahera Island, he said.

He added that Eramet would provide a complete investment plan for the project by the end of 2012 after settling permits and agreements on key issues with the Indonesian government.

After the first phase is complete, the Weda Bay Nickel project is expected to produce 35,000 tons of nickel a year. After the second phase, that should increase to 65,000 tons. Buffet said the project could employ about 6,000 people.

It will include the development of several mining centers in Halmahera, a hydro-metallurgical plant and facilities that provide electricity, water treatment and other basic infrastructure like roads and housing.

Hatta Rajasa, the coordinating minister for the economy, said the president welcomed the plan.

“This is one of the biggest investments in eastern Indonesia and will support the government’s Master Plan for the Acceleration and Expansion of Indonesia’s Econo mic Growth,” Hatta said.

Energy Minister Darwin Zahedy Saleh said the project should be completed by 2015.

Eramet has mining operations in New Caledonia for nickel and in Gabon for manganese.

Weda Bay Nickel is a joint venture with Japanese trading house Mitsubishi and Indonesian state-owned miner Aneka Tambang, commonly known as Antam.

Eramet holds a stake of 54 percent, Antam 10 percent and Mitsubishi the remainder.

Pertamina Flags $40b Investment in Riau Gas Project

Jakarta Globe, Ririn Radiawati Kusuma, September 05, 2011

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State oil and gas company Pertamina and its partners expect to spend up to $40 billion to develop a gas block in western Indonesia, a company official said on Monday.

Muhammad Husen, director of upstream business at Pertamina, said the huge cost would include investment for exploration, exploitation and gas transportation system.

“The $40 billion cost is the original budget. It can be increased or reduced,” Husen told reporters on Monday.

The East Natuna block in Riau Islands contains about 200 trillion cubic feet of gas and would be the largest gas reserve in Indonesia, according to US oil giant Exxon Mobil. But only 45 trillion cubic feet can be taken because extracting the remainder, with its high carbon content, would be too costly.

Pertamina will cooperate with three other oil and gas companies: Malaysia’s Petronas Carigali, France Total E&P Indonesie and US ExxonMobil Indonesia.

Divvying up the composition of the stakes in the gas block has not been decided. Husen said last month that the ownership stake is expected to be determined in October and the production-sharing contract will be signed on Oct. 28.

A PSC typically stipulates the sharing of revenue between the companies and the government. It also sets tax incentives, tax obligation and cost recovery.

It was not clear whether this East Natuna gas block would be the biggest investment in Indonesia’s oil and gas history.

The East Natuna gas block will require advanced technology to extract natural gas. Last month, Husen said Pertamina and its partners were confident that they have enough expertise and technology to harvest gas from the block.

Total investment to develop the Masela block in Timor Sea and to build the LNG floating terminal is estimated at $19.7 billion upon completion in 2016.

The cost to develop the East Natuna project may be less than the estimated budget, at about $20 billion, Husen said.

“The $20 billion cost is our calculation for using the gas pipeline to deliver the gas,” Husen said. The cost will rise should the delivery system to channel the gas be processed by the LNG plant, he said, though that may depend on the government’s objective.

The consortium, Husen added, has several possible plans for Natuna, including delivering gas through a pipeline to Sumatra and Java. Some of the gas will be sold to Malaysia, he said.

Ministry vows to speed up issuance of geothermal project permits

The Jakarta Post, Jakarta, Mon, 09/05/2011

The Forestry Ministry promised that they would comply with instructions from President Susilo Bambang Yudhoyono to speed up the issuance of permits for geothermal projects based in forest areas.

“When the [permit] requirements are completed, we guarantee that it will take no longer than three months for the geothermal permit to be issued,” Forestry Minister Zulkifi Hasan said on Monday, as reported by kompas.com.

He added that he had ordered his ministry officials to speed up the process in issuing permits.

According to Zulkifli, several companies have already proposed investments in geothermal projects.

“Many have proposed [projects],” he said, adding that he has signed several project permits already.

Ministry eyes desalination technology to mitigate potential water crisis

The Jakarta Post,  Sun, 09/04/2011

The Maritime Affairs and Fisheries Ministry has developed sea water desalination technology to convert sea water into fresh water to cope with the possibility of a water crisis.

“Making mineral water from the sea is a strategic step in anticipating the possibility of a clean water crisis in the future,” Maritime Affairs and Fisheries Minister Fadel Muhammad said on Saturday, as reported by kompas.com.

The desalinated water could be a pivotal shift in fresh water supplies. The process could also produce salt.

According to the ministry, Indonesia has several potential locations where this technology could be developed. The areas include Nusa Penida and Gondol in Bali, Lombok Strait in West Nusa Tenggara, Biak Island in Papua and Pelabuhan Ratu in West Java.

Around 70 percent, or 5.8 million kilometers, of Indonesian territory is comprised of water.

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Japan just beginning to tap into high potential for geothermal power generation

Mainichi Japan,  September 3, 2011

Kuju Kanko Hotel President Yoshiaki Koike stands next to the Kuju
 Geothermal Power Plant, with the hotel in the background, in the Oita
Prefecture town of Kokonoe. (Mainichi)

The president of Kuju Kanko Hotel, Yoshiaki Koike, is also the manager of the Kuju Geothermal Power Plant.

Located at the foot of Mt. Kuroiwa in Aso-Kuju National Park in Oita Prefecture, the plant has a power output of 990 kilowatts, producing enough electricity to power the hotel and have some left over to sell to a private electrical supply company.

Koike took an interest in the geothermal power business in the early 1990s when he saw the amount of steam pouring out of a well for hot springs that were drilled in the area. Two wells -- 350 and 405 meters deep respectively -- were dug up for the power station, into which Koike invested 200 million yen in equipment including generators and cooling towers. Plant operations began in 1998.

Although Koike had hoped the plant would "kill two birds with one stone" by saving electricity costs and increasing hotel publicity, he had not expected the selling price of electricity to be so low. The electricity produced at Kuju would have to be sold at 16 yen per 1 kilowatt per hour of electricity to be profitable, but the going rate is a mere several yen. Koike would not be able to turn a profit if the plant hadn't given the hotel the reputation of being eco-friendly. Needless to say, he's eager to see what will happen to electricity prices once a feed-in tariff is adopted next July.

About a 15-minute drive west from Mt. Kuroiwa is the Hacchobaru Geothermal Power Plant. It is the biggest plant of its kind, costing 37 billion yen to build and generating 110,000 kilowatts of electrical power with its two generators. Hot water and steam retrieved from a well that has been dug about 2,000 to 2,500 meters underground to a geothermal reservoir heated by magma power the plant's turbines.

Located adjacent to the main geothermal power plant is Japan's only geothermal binary power plant. Standard geothermal plants require steam and water at temperatures of 150 degrees Celsius or higher to function. However, because binary plants use pentane, an organic solvent that evaporates more easily than water with a boiling point of 36 degrees Celsius, they can be used in locations where extremely hot water and steam are unavailable. Japan's sole binary plant, which began its operations in 2006, has a relatively small power output of 2,000 kilowatts, but Kyushu Electric Power Co. officials anticipate that such plants will make the local production and consumption of energy possible.

The estimated geothermal power-generation capacity of volcano-dotted Japan is about 23.47 million kilowatts, the world's third highest behind the U.S. and Indonesia. Furthermore, Fuji Electric Co., Mitsubishi Heavy Industries Ltd., and Toshiba Corp. comprise 70 percent of the world's share in geothermal power generators. Compared to solar-power and wind-power generation, which are easily affected by the weather, geothermal power plants have a consistently high operation ratio of around 70 percent.

Of the areas in Japan with abundant geothermal resources, 80 percent were designated as national parks or quasi-national parks prohibiting development, and many are located adjacent to hot spring resorts. A power industry insider says that local businesses strongly oppose the construction of geothermal power plants, citing fears that their hot springs will dry up. This explains why, despite favorable conditions for geothermal power generation in Japan, the country's 17 geothermal plants produce a mere 535,000 kilowatts total per year, or just 0.3 percent of all the electricity produced nationwide every year.

To address this conundrum, the government last June eased restrictions on development in national and quasi-national parks. Developers are now permitted to tap into geothermal resources underground if they drill diagonally into the ground from outside national and quasi-national parks, or take other steps to preserve the parks' landscapes.

Using diagonal-digging technology, Mitsubishi Materials Corp. and Tohoku Electric Power Co. in July began probing for geothermal resources below Towada-Hachimantai National Park, located next to Sumikawa Geothermal Power Plant in the Akita Prefecture city of Kazuno. According to a senior official at the Ministry of Economy, Trade and Industry, there is growing momentum among private companies in the renewable energy business to create an "All-Japan" company dedicated to the development of geothermal power.

Click here for the original Japanese story

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