Panax Geothermal’s (ASX: PAX) Indonesian geothermal projects have made progress with finalisation of power purchase agreements for two projects expected soon.
PT PLN (Persero) and the country’s Ministries of Finance and Energy have confirmed that all negotiations relating to the terms and conditions of the agreements for the Sokorai and Dairi project are now final.
Final execution copies of these agreements are now being reviewed and prepared with execution expected to occur soon.
This will allow Panax and its joint venture partner PT Bakrie Power to finalise required project financing for the two projects.
Meanwhile, the scope of the Ngebel geothermal project in East Java is likely to be expanded as Panax and Bakrie have been granted the rights to develop the transmission-related aspects of the project.
This provides an opportunity for an increased electricity tariff to the JV and provides increased certainty over the timing and deliverability aspects of the project.
Progress has also been made towards finalisation of the power purchase agreement for Ngebel.
Indonesian geothermal projects
Sokoria is located in the Flores and will be capable of producing 30 megawatts of power, the same capacity as the Dairi Prime project in Northern Sumatra.
Panax is earning a 35% stake in Ngebel, which with expected power generation capacity of 165 megawatts, dwarves both Sokoria and Dairi Prime together.
The company is also carrying out exploration at the Jambi project in Central Sumatra, which has the potential to produce 80 megawatts of power.
Attractive investment location
Not only does Indonesia host some of the richest geothermal reservoirs in the world, it has ruled that geothermal power would be excluded from the change in Indonesian resource ownership laws that require foreign investors in coal, copper, gold and other resources to reduce their stakes to 49% 10 years after the original date of production.
As part of the Indonesian Government's carbon strategy, geothermal developers will also benefit from a guaranteed feed in tariff of US$97 per megawatt hour, along with carbon credits to geothermal energy generators. In addition, the government offers full protection to geothermal projects during exploration and construction.
The Indonesian Government has plans to increase geothermal production by 240% over the next four years to more than 4,000 megawatts.
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