Ormat unit signs $254m Indonesian geothermal deal

The first phase of the 330-megawatt Sarulla geothermal power station in Sumatra is due to begin operating in 2016.

Ormat Industries Ltd. (TASE: ORMT) subsidiary Ormat Technologies Inc. (NYSE: ORA) yesterday announced that Indonesia's Sarulla Operations Ltd., in which it is a partner, signed a joint operating contract (JOC) and energy sales contract (ESC) for the 330-megawatt Sarulla geothermal power project in Tapanuli Utara in north Sumatra. Ormat designed the plant and will supply its Ormat Energy Converters, for which it will receive $254 million.

Under the JOC, PT Pertamina Geothermal Energy, the project concessionaire, has granted Sarulla Operations the rights to use the geothermal field, and under the ESC, Indonesia's state utility, PT PLN, will buy Sarulla's electricity for 30 years.

Ormat unit Ormat International Inc. owns 12.75% of Sarulla Operations. Its partners are Indonesia's Medco Energi Internasional Tbk (Jakarta( MEDC) and Japan's Itochu Corporation (TSE: 8001) and Kyushu Electric Power Co. Inc. (TSE: 9508)

Sarulla is Indonesia's largest geothermal power project. It will be built in three phases of 110-megawatts each, and will utilize both steam and brine extracted from the geothermal field to increase the power plant's efficiency. Preliminary testing and development of the project has begun, and construction will start when consortium secures financing in a year. The project's first phase is scheduled to begin operating in 2016, and the next two phases will start 18 months later.

Ormat said that Japan Bank for International Cooperation (JBIC) and the Asian Development Bank are due to finance the project, along with loans from five commercial banks, backed by political risk guarantees from JBIC

Ormat CEO Yehudit Bronicki said, "After a long process of negotiations, we reached an agreement on the amendments to the JOC and ESC agreements that were required for the bankability of the project. Once the financing closes, we will be able to recognize revenues from the supply of the equipment over the construction period and further strengthen the performance of our Product Segment. This project, represents our entry into Indonesia, a region we have been excited about for some time, We believe the potential opportunity in Indonesia is significant, and we look forward to pursuing opportunities in what we anticipate will be a growing market in the years to come. I would like to thank Pertamina, PGE, PLN and our partners for their confidence in our technology."

The Sarulla geothermal power stations will join Ormat's current power stations in the US, Kenya, Guatemala, and Nicaragua, which generate a net 575 megawatts of electricity.

Published by Globes [online], Israel business news - www.globes-online.com - on April 4, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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