Vice President Boediono has called on relevant parties to speed up the construction of the Sarulla power plant project in North Sumatra, saying that once the geothermal plant generates power, it will save around Rp 4 trillion in annual electricity subsidies.

“The government fully supports this geothermal power plant project as it will bring financial and non-financial benefits. We expect investors to join because the state budget is insufficient,” he said at his office in Jakarta on Thursday.

The Vice President made the call after witnessing Energy and Mineral Resources Minister Jero Wacik hand over the amended Energy Sales Contract (ESC)/Joint Operating Contract (JOC) to state electricity company PT PLN and PT Pertamina Geothermal Energy (PGE).

Also at the ceremony, Finance Minister Agus Martowardojo presented a warrant of operation feasibility to Sarulla Operations Limited, which will operate the geothermal project.

Boediono said many problems and challenges had affected preparations for the Sarulla project. “Today, we are optimistic about the prospect of this geothermal power plant. This will be one of the world’s biggest geothermal power plants,” he said.

The lengthy and obscured preparations of this project had prompted State-Owned Enterprises Minister Dahlan Iskan to dismiss four executives with PT Pertamina Geothermal Energy over incompetency.

With the renewed energy sales contract, the electricity to be produced by Sarulla will be priced at 6.76 cents per kilowatt hour (kWh).

“The price is very cheap. It will save electricity subsidies of Rp 4 trillion per year. It will also reduce CO2 [carbon dioxide] emissions by up to 1 million tons per year,” Boediono said.

The Sarulla geothermal power plant project, with 3x110 megawatts total capacity, was initiated in 1990.

However, in 1993, the project faced various issues, including shares and contract ownership.

US-based Unocal North Sumatra Geothermal Ltd. previously held the contract to develop a JOC with state-owned PT Pertamina. As the financial crisis hit the country in 1997, the project was suspended and was started again in 2003.

In 2004, PT Geo1dipa Energy, a joint venture between Pertamina and PLN, was selected to lead the Sarulla project. Disagreement rose over the contract, leading to more uncertainties over the geothermal power plant project.

In 2007, a consortium called Sarulla Operations Limited got the contract to develop Sarulla. The consortium consists of PT Medco Power Indonesia — which is 49 percent owned by Jakarta-listed PT Medco Energi Internasional and the remaining share by Saratoga Capital — with a 37.25 percent participating interest, US-based Ormat with 2.75 percent, Japan’s Itochu with 25 percent and Japan’s Kyushu Electric with 25 percent.

Indonesia has about 40 percent of the world’s potential geothermal energy.

“We’ve now completed the administration. The power plant will start to supply electricity in 2016,” Jero said.

The event also highlighted the joint regulations between the Energy and Mineral Resources Ministry, the Finance Ministry as well as the State-Owned Enterprises Ministry on the status of the ownership of geothermal assets as a consequence of a JOC.

Medco Energi president director Lukman Mahfoedz said asset ownership was the main issue in the prolonged development of Sarulla.

“The lenders would like that the assets belong to the consortium at least during the financial period,” Lukman said.

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