Kyushu Electric moves closer to maiden geothermal project in Indonesia | Company data 

(The Insider Stories) – Kyushu Electric Power Co. (9508) is inching closer towards its first geothermal power sales in Indonesia after its consortium signed a 30-year deal with Indonesian state electricity company Perusahaan Listrik Negara, as part of its efforts to diversify its portfolio ahead of increasing competition in Japan.

PLN will be the off-taker from the 330-megawatt geothermal project planned to be constructed by Sarulla Operations Ltd., a venture consisting of Kyushu, trading firm Itochu Corp. (8001), Medco Power Indonesia-an affiliate of Jakarta-listed Medco Energi Indonesia (MEDC)-and New York-listed Ormat Techonologies (ORA).

The consortium plans to build three geothermal plants in North Sumatra, each with 110 MW capacity. Construction is expected to start next year with the first plant estimated to start operations by 2016.

Itochu and Kyushu each hold a 25% stake in the consortium, Medco Power has 37.25% and Ormat owns the remaining 12.75%. The companies didn’t provide investment figures, but Japanese media report that the project may cost 100 billion yen ($1 billion).

The project may receive loans from the Japan Bank for International Cooperation and the Asian Development Bank. JBIC may also issue political risk guarantees for commercial lenders interested in financing the project.

Indonesia sits in a highly active volcanic belt known as the Pacific Ring of Fire and is estimated to boast 40% of the world’s geothermal potential.

That means there is an estimated 28,000 MW of power that Indonesia could generate from geothermal alone, although overlapping regulations and low selling prices in the past have deterred investments and left Indonesia lagging behind the neighboring Philippines in geothermal power.