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apan-based Sumitomo Corporation will team up with International Power GDF Suez and PT Supreme Energy to build two geothermal power plants in Muaralaboh in West Sumatra and Rajabasa in Lampung.

The power plants will have a total capacity of 2x110 megawatts (MW) each. State power utility PT PLN will then buy the electricity with the price of 9.4 US cents per kilowatt-hour for Muaralaboh and 9.5 cents for Rajabasa.

The investment value for the Muaralaboh power plant reaches $661 million, while the Rajabasa plant hits $683 million. The mining permits for the two geothermal blocks were awarded in early 2010 and would last for 35 years. The plants are expected to begin commercial operations in 2016.

Indonesia is home to 40 percent of the world’s geothermal reserves with the potential of producing more than 27,000 MW of power. However, as of today, the country can only generate 1,341 MW of power from geothermal power plants, or only 4.6 percent of its total potential.

“The two projects are part of the second phase of the 10,000 megawatts [MW] fast-track program,” PLN president director Nur Pamudji said during his speech at the signing ceremony of the power purchase agreements (PPAs) at the Finance Ministry in Jakarta on Friday.

“Electricity produced from the plants will be connected to the Sumatra interconnection system which spans from Lampung to Aceh,” he added.

Coinciding with the signing, Finance Minister Agus Martowardojo announced that the government had issued guarantee letters for PLN’s business worthiness (SJKU) for the two projects to help developers find financing.

“The guarantee letters are part of the ministry’s commitment to accelerate the construction of power plants using renewable energy, coal and natural gas by independent power producers [IPP],” he explained.

Coordinating Economic Minister Hatta Rajasa claimed the guarantee would pave the way for the resurgence of geothermal development in the country. He said a few decades ago, Indonesia was known for its most effective and efficient Kamojang geothermal power plant in West Java.

“But after that, we spent too much time on discussing plans, but not in executing them,” he emphasized.

Pamudji expected that the issuance of the guarantee letters could be a good precedent for other geothermal projects. He reported that the company was now in negotiations with several other developers across the country.

“We finished the negotiation for Muaralaboh and Rajabasa in only four months. For Pak Supramu Santosa [PT Supreme Energy president director], that is fast,” Pamudji said.

The consortium of Sumitomo, GDF Suez and Supreme Energy had completed the feasibility study for the project and land acquisition, Supramu reported. In Muaralaboh, the consortium would start mobilizing heavy equipment to the sites in April and started drilling in August.

“For Rajabasa, the area is a bit difficult. We predict that we can begin drilling in early next year,” he said.

The Rajabasa geothermal area is included into the protected forest. Supramu said the consortium had requested the Forestry Ministry issue permission to develop the area.

The government has issued a presidential decree to allow the development of geothermal resources located within protected forests.