Panax Geothermal (ASX: PAX) is poised to enjoy greater financial certainty in Indonesia with the Government planning to increase incentives for geothermal investment in the country.
Indonesia’s Energy and Mineral Resources Ministry is proposing to increase the feed-in tariff by at least 24% to either a flat rate of US$125 per megawatt hour (MWh) or US$120/MWh for developments close to the national transmission grid and US$145/MWh for more remote projects.
This compares with the current US97/MWh tariff and follows a number of recent investment incentives the Indonesian Government has introduced for renewable energy projects.
Panax is developing more than 300 megawatts of geothermal power generation capacity, with about 165 megawatts net to itself.
Power purchase agreements for 2 of these projects are expected to be finalised soon, allowing Panax and its local partner Bakrie Power to finalise required project financing.
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.
The partners are also likely to be granted the rights to develop the transmission-related aspects of the Ngebel geothermal project in East Java, giving them an increased electricity tariff as well as increased certainty over the timing and deliverability aspects of the project.
Other events that have bolstered Panax’s position in the couple of months include confirmation that geothermal and renewable energy investments would not be impacted by the Indonesian Government’s changes to resource ownership laws and the restoration of the country’s debt rating to investment grade.
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