Ormat to Supply Power Plants to Indonesia for World’s Largest Geothermal Project

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Researched by Industrial Info Resources (Sugar Land, Texas). The potential of the Indonesian geothermal power generation industry, which has seen a mounting number of relatively small-scale projects in the past few years, will now be demonstrated by the Sarulla project, which will be the largest geothermal project in the world with a combined generating capacity of 340 megawatts.

A consortium consisting of Ormat International, a wholly-owned subsidiary of Ormat Technologies (NYSE:ORA ) (Reno, Nevada), Medco Energi Internasional, Indonesia’s largest private oil and gas company, and Japan’s Itochu Corporation, has been awarded the contract to develop Sarulla, North Sumatra on an independent power producer basis. The tender was issued by the state utility PT PLN (Persero), which will purchase the power output under a 30-year power purchase agreement (PPA).

The project will be constructed in three phases over a five-year period, starting after financial closing. The first phases of 110/120 megawatts will be operational within 30 months of the financial close and the last of three units will operate within 48 months. The power will serve the base load of PLN’s North Sumatra-Aceh grid system. Once in full operation, annual revenue from the project under the PPA will be about $110 million.

The scope of the contract covers the completion of the development of the geothermal steam field, building the field piping systems, and three ORMAT designed and supplied power plants with a gross capacity of 340 megawatts. The consortium will own and operate the facilities.

The value of Ormat’s scope of work will be about $200 million of the total $600 million project investment and will include the power plants and setting up and supervising the operations and maintenance of the plants, which will use Ormat technology and equipment. The supply contracts will be released to Ormat on financial closing of the project, which is expected twelve months from the date of the PPA in November 2006. An Indonesian special purpose company (SPC) will be established by the consortium members under the framework of a joint operating contract with the concession holder Pertamina, the state-owned oil and gas company. Ormat will be a minority shareholder in the SPC.

The SPC will have an option to expand several geothermal production wells, which would support the generation of more than 100 megawatts. The Sarulla Geothermal Working Area consists of four distinct reservoirs. The consortium will develop two of these to achieve the project’s power capacity. Although Indonesia’s current installed geothermal power capacity is about 800 megawatts, the exploitable potential of the power source in the country is estimated conservatively at 20,000 megawatts.

The power plants will be Ormat Geothermal Combined Cycle Plants, incorporating proprietary Ormat Energy Converter (OEC) units. The company has already supplied and constructed five plants of this type in the U.S, the Philippines, and New Zealand. The plants use air-cooled condensers to achieve 100% geothermal fluid re-injection, which serves to sustain the reservoir and to produce electrical power with very limited environmental impact.

Ormat geothermal combined cycle steam/binary plants have logged over 19 million turbine hours of operation at very high levels of availability. The company’s products and systems are covered by more than 70 patents. In addition to building and developing geothermal power units and projects, the company designs, manufactures and sells remote power units, as well as recovered energy power units using solar and biomass sources.

The U.S is the current world leader in geothermal power generation with a total of about 2,800 megawatts out of a global total of 8,900 megawatts. A further 13,000 megawatts of sources in the U.S. are expected to be developed in the next 20 years. In 2005, seventy-two countries reported to the Geothermal Energy Association on using 16,000 megawatts of direct geothermal energy usage for heating, melting, and agricultural purposes. Global estimates of potential power generation sources are elastic and increasing. Currently, the top of the range estimates have about 150,000 megawatts in the total Identified and Undiscovered Resource Base.

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