State-controlled coal miner Tambang Batubara Bukit Asam and a Chinese partner have won a tender to build a pair of coal-fired power plants with a total capacity of 1,240 megawatts in South Sumatra.
The two new plants, each with 620 MW capacity, will be built in Tanjung Enim near the Banko Tengah coal mine and will cost $1.59 billion.
Bukit Asam (PTBA) is working with Huadian, a Chinese state-owned power company, to complete the project.
Construction is expected to start by the end of next year. Operations at the first unit are expected to commence in June 2016, and three months later for the second unit.
Electricity output from the plants will be sold to state utility company Perusahaan Listrik Negara. The project is considered vital for the nation’s development because it is intended to meet increasing electrical demand in Java and Sumatra.
“In the financing of the project, worth $1.59 billion, will solely be the responsibility of China Huadian and does not need guarantees from the government of Indonesia,” PTBA said in a statement on Tuesday.
In terms of financing, 75 percent of the total will come from debt and the remainder equity.
PTBA said it is committed to suppling the plants with a total of 5.4 million tons of coal annually from its Banko Tengah coal mine. The low-grade coal will have about 4,200 kilocalories.
“The company has been eying this project for a while to construct and to distribute its coal,” said Reza Priyambada, an analyst with Indo Surya Asset Management.
“This would be a positive support for the company’s business, because besides getting income from the construction services PTBA is also securing a market here.”
Project negotiations had been ongoing since March 2005, and a memorandum of understanding was signed a month later.
Reza added: “If the company will be responsible for the power source supply, then it will also create income for it and it will have a clear buyer for a certain amount of its coal production for as long as the contract lasts, even when it only has the minority stake in the construction.”
He did not know the magnitude of this contract compared to others owned by PTBA or other coal miners.
PTBA will have a 45 percent stake in the project and Huadian the remaining 55 percent.
PTBA’s Banko Tengah coal mine will also develop a 307 kilometer railway, called Transpacific Railway, which is expected to be operational in 2014.
The new rail line will be able to transport up to 27 million tons of coal per year. It will move coal from the South Sumatra mine to the neighboring province of Lampung.
Shares in PTBA closed steady at Rp 16,500 on Wednesday.
Bukit Asam and China Partner to Build Coal Plants | The Jakarta Globe.
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