Indonesia Geothermal Q3 Update: Sluggish Process in Pursuing the 2023 Target

By: William Jhanesta

Market Update - October 2023

Following is an updated report of Indonesia’s geothermal sector in the third quarter of this year, highlighting various activities and key issues in the sector during the July-September period, and what to expect in the fourth quarter of the year.

Geothermal Installed Capacity as of September 2023
The installed capacity of geothermal power plants in Indonesia has increased following the official operation of the 3 MW Sokoria Unit-2 geothermal power plant owned by KS Orka Renewables Pte Ltd (KS Orka) in early August. PT Sokoria Geothermal Indonesia (SGI), the operator of the Sokoria project and subsidiary of KS Orka, successfully completed the Unit Rated Capacity (URC) on July 13-15, 2023. After receiving the Operational Certificate (SLO) from the Ministry of Energy and Mineral Resources, Sokoria Unit-2 was officially declared to have reached its commercial operation date (COD). This additional capacity has raised Indonesia's total geothermal installed capacity to 2334.58 MW.

However, the increase of 3 MW falls significantly short of the 2023 capacity addition target outlined in PLN's electricity business plan (RUPTL), which had set a target of up to 190 MW. It is noteworthy that the Sokoria Unit-2 project was originally scheduled for operation in 2022, making it a carry-over project. It indicates that none of the 2023 targets specified in the latest RUPTL have been realized thus far.

Key Highlights 
While the increase in installed capacity in the third quarter of this year may not be significant, Petromindo has noted several important developments in the Indonesian geothermal industry. These range from announcements of geothermal concession tenders, preparations for preliminary surveys and exploration drilling, the signing of various agreements, to mergers and acquisitions (M&A). Some of these events hold particular significance and warrant further monitoring and review, as they have the potential to stimulate the gradual expansion of geothermal generation capacity in the coming years.

July 2023:

• PT Barito Pacific Tbk (BRPT) signed an agreement with Philippines-based ACEN Corporation to increase its share composition in the Salak and Darajat geothermal projects. BRPT currently controls 80.2% of Star Energy Geothermal (Salak-Darajat) BV shares, and the remaining 19.8% is owned by the ACEN business unit, ACEHI Netherlands BV.
• PGE and partners applied for a 1-year exploration permit extension for the Seulawah Agam concession in Aceh Province. The consortium is expected to start exploration drilling next year at the earliest.
• KS Orka and PGE signed an MoU for the development of a co-generation power plant with a capacity of 210 MW using a binary cycle power plant. Previously, PGE also signed a cooperation agreement for a similar study with ORMAT at the end of 2022. Most likely, PGE will combine technologies from the two companies for the co-generation program on its existing assets.
• Japan-based Mitsui Oil Exploration Co (MOECO) announced that it will start exploring geothermal business opportunities in Indonesia after signing an MoU with PT Medco Power Indonesia (MPI). The two companies will jointly explore geothermal resources in Sumatra region.

August 2023:

• PT Sokoria Geothermal Indonesia, announced that it has officially received a Certificate of Operation (SOL) from the Directorate General of Electricity for the Sokoria Unit-2 (3 MW) project, marking the power plant's official COD.
• The development of a geothermal project in Jaboi, Aceh Province, is reportedly hampered by technical issues related to subsea cables. In fact, PT Sabang Geothermal Energi (SGE), has received a Power Purchase Agreement (PPA) contract from state-owned electricity firm PT PLN (Persero) since 2014. This indicates that the nine-year project may not be continued indefinitely.
• Gold miner PT Archi Indonesia (ARCI) disclosed plans to establish a geothermal joint venture with PT ORMAT Geothermal Indonesia by the end of September. ORMAT is currently conducting a geothermal evaluation at ARCI's Toka Tindung gold mine in North Sulawesi Province.
• PLN announced an invitation to bid for the selection of development partners for PLN's geothermal concessions, including Kepahiang (110 MW), Gunung Ungaran (55 MW), and Oka Ile Ange (10 MW). Proposals must be submitted no later than 14:00 WIB on October 10, 2023.
• In addition, PLN also announced an extension of the proposal submission time for the development of PLN-owned geothermal concessions, including Tulehu (20 MW), Atadei (10 MW), Songa Wayaua (10 MW), and Tangkuban Perahu (20 MW). The original proposal submission date of August 22, 2023 will be extended until 14:00 WIB on September 29, 2023. PGE signed an MoU with Africa Geothermal International No. 1 Limited (AGIL No. 1) to develop a geothermal concession in Longonot, Kenya.
• PT Sumbawa Timur Mining (STM) submitted the preliminary survey and exploration (PSPE) results of the Hu'u Daha area to the Ministry of Energy and Mineral Resources. If the results are approved, the Ministry will upgrade the status of WPSPE Hu'u Daha to WKP in the near future.
• Heavy equipment distributor, energy, and mining contractor firm PT United Tractors Tbk (UNTR) reported that its renewable energy unit PT Energia Prima Nusantara (EPN) has signed agreement to acquire 40.476% shares of PT Supreme Energy Sriwijaya (SES) from PT Supreme Energy in a $42.33 million deal. SES is one of shareholders of PT Supreme Energy Rantau Dedap (SERD), which operates the 2x49 MW Rantau Dedap geothermal power plant in South Sumatra Province.

September 2023:

• Chinese oil and gas company PetroChina Company Ltd visited the Ministry of Energy and Mineral Resources to express its interest in investing in the geothermal sector in the country. PetroChina plans to acquire part of the shares of PT Sejahtera Alam Energy (SAE) for the development of Baturaden geothermal power project in Central Java.
• The good news continued with the securing of SAE's exploration permit. With this permit, SAE will continue measuring geophysical data and drilling exploration wells on the northern part of Baturaden area.
• PGE expressed interest in the potential to export geothermal-based electricity to neighboring countries, including Singapore and Malaysia. The company has initiated initial feasibility studies to export electricity to other countries in Southeast Asia as well as sell electricity to green energy industry clusters. These studies also aim to reduce potential oversupply of electricity in the domestic market.
• PGE reported seeks proposal from banks for a $ 1 billion Environmental Social Governance (ESG) loan to expand its existing renewable capacity. The company expects offers by the end of September, looking to borrow at less than 100 basis points over the Secured Overnight Financing Rate (SOFR) benchmark.
• PT PLN Gas & Geothermal (PLNGG), a unit of PLN, recently quit its geothermal business and will focus on the gas-to-power sector. The management rights of PLNGG's geothermal assets, Mataloko and Ulumbu, have now been handed over to PT PLN Indonesia Power (PLN IP). PT Barito Renewables Energy Tbk (BREN), a member of Barito Group, announced its plan to list 4.5 billion units of shares, representing 3.35% of the company’s enlarged capital to the Initial Public Offering (IPO). The company has appointed PT BNI Sekuritas as the underwriter of the IPO.
• PT Geo Dipa Energi (GDE) and Japan-based TOYO Engineering signed on Wednesday an MoU on joint studies for full-scale geothermal utilization and geothermal technology. In this collaboration, GDE and TOYO will conduct joint studies related to closed-loop technology.
• Julfi Hadi, President Director of PGE, has been elected as the new Chairman of the Indonesian Geothermal Association (INAGA) for the period of 2023-2026. Julfi was elected during INAGA’s XI National Meeting held in Jakarta.

Special Highlights
Barito’s Ambition as the Largest Geothermal Company in Indonesia
PT Barito Renewable Energy Tbk (BREN), a subsidiary of PT Barito Pacific Tbk (BRPT), is a holding company that focuses on the geothermal-based power generation business. BREN owns 100% of Star Energy Geothermal, which currently operates three giant power plants in Indonesia, as shown in Figure 3. Through Star Energy Geothermal, BREN is currently the largest geothermal company in Indonesia with an installed capacity of 886 MW. This is way bigger than its competitor, PGE, which operates 672.5 MW of power plants on its own operated fields. With the massive on-going projects, it is likely that BREN's position in the next two to three years will be overtaken by PGE. However, BREN's position as the leading geothermal company in Indonesia will not be easily displaced by other players.

By 2027, BREN targets an additional geothermal generation capacity of 146 MW by 2027. The addition will make BREN a 1 GW company, increasing the company's total geothermal power plant capacity to 1,032 MW from the current 886 MW.

To achieve this target, BREN is currently in the process of commissioning the 15 MW Salak binary plant which is expected to start COD in November 2023. Wayang Windu Unit-3 with a capacity of 23 MW is also in progress and is estimated to enter the commercialization phase in 2026.

In addition to producing assets, BREN also has two exploration fields, Suoh-Sekincau (Lampung) and Gunung Hamiding (North Maluku). For Suoh-Sekincau, it seems that exploration activities are still challenging as the field is located within the Tropical Rainforest Heritage of Sumatra (TRHS), which has been inscribed as a World Heritage site by UNESCO. Meanwhile, for Gunung Hamiding, BREN is still waiting for the extension of its exploration license, which will expire at the end of this year. According to a recent update received by Petromindo, BREN will commence exploration drilling at Gunung Hamiding as soon as February next year.

BREN's IPO
BREN has been launched into the stock market in 9 October 2023. The IPO successfully sold 4.5 billion units of shares, representing 3.35% of the company’s enlarged capital. The company sets the IPO share price in the range of Rp670 - Rp780 per share. BREN is targeting funds to be raised from this IPO amounting to Rp3.51 trillion.

The company said the proceeds of the IPO will be used to repay a portion of loan facility to Bangkok Bank Public Company Limited in the amount of $158.59 million and repay portion of loan to Star Energy Oil and Gas Pte Ltd (29% of the current loan value of $545 million), payment to Star Energy Oil and Gas Pte Ltd (SEOG) of $66.5 million, related to the ACEHI share purchase transaction, and the obligation to return the advance payment to the company of $6 million, which is used for working capital.

In the lead-up to the IPO, the company revised the percentage of public shares to 3%, sold 4.02 billion shares at Rp 780 per share, and raised around Rp 3.13 trillion. BREN's share price jumped 25% to IDR 975 on its market debut and at the time of writing had reached IDR 2,970.

PGE's steps to become a World Class Geothermal Company
In addition to continuing to increase its generation capacity in Indonesia, PGE is currently exploring the potential of the geothermal business outside Indonesia to become a world class geothermal company. Last August, during President Joko Widodo's visit to Kenya, PGE signed an MoU with Africa Geothermal International No. 1 Limited (AGIL No. 1) to develop a giant geothermal concession in Longonot, Kenya.

According to an initial evaluation conducted by AGIL, the field has the potential to be developed up to 500 MW, with a development plan gradually in the first phase of 140 MW, which is ready for exploitation. PGE and AGIL plan to sign a definitive agreement by the end of this year to immediately realize the development plan.

In addition to AGIL, PGE recently signed a non-disclosure agreement (NDA) with a wholly government-owned company, Geothermal Development Company (GDC). The agreement was made to further study the possibility of cooperation in developing geothermal potential in Kenya and Indonesia. In addition, an agreement was also made to study the development plan for the first phase of the Suswa concession in Kenya with a capacity of 3x100 MW.
Besides Africa, PGE is also targeting new markets in Continental Europe. PGE's top official said recently that the company will visit Europe in October to discuss with several potential partners. PGE claims that many European companies are serious about collaborating with it but cannot be disclosed at this time. Some rumors say that PGE is eyeing geothermal fields in Germany and Turkey, but there is no official statement from PGE.

What to Expect for the Last Quarter of the year?
In the last quarter of 2023, Indonesia's geothermal energy sector is set for notable progress. Several key milestones including the announcement of new WKP auctions, the opening of EPC tenders, and project commercialization are expected to be successfully implemented in the remaining months of the year. This particularly applies to plans that have already shown significant progress.
Tender 2 WKPs and 1 WPSPE

• The Geothermal Directorate of the Ministry of Energy and Mineral Resources intends to initiate geothermal tenders for two WKPs in the fourth quarter of 2023. These WKPs include Cisolok Cisukarame in West Java and Bora Pulu in Central Sulawesi.
• The two WKPs will be offered through an open tender scheme.
• Additionally, the government will open a tender for the WPSPE Rongkong in South Sulawesi. Companies interested in this opportunity must conduct a preliminary survey and drill at least one exploration well to confirm their development plan for a 20 MW geothermal power plant.

Salak Binary to go On-Stream in Q4

• Petromindo estimates that the Salak Binary project, which has been postponed several times since last year, will only reach the COD phase in Q4 this year, precisely in November or December 2024. The latest update Petromindo received is that Salak Binary 15 MW has entered the commissioning phase and the commercial operation will be reached soon.
• The successful achievement of COD for Salak Binary is expected to provide positive sentiment and potentially boost the value of BREN shares, which are scheduled to be listed on the Jakarta Stock Exchange in early October.
• Salak Binary will be the first power plant to implement binary cycle technology, utilizing excess steam from existing units in Java and western Indonesia.

EPC tender for Dieng-Patuha 2 Expansion Project

• GDE has completed the drilling campaign for the Dieng-2 expansion project with a total of 10 production wells. Meanwhile, for Patuha-2, drilling activities have only reached 40% with a target of 12 production wells.
• GDE expects the Patuha-2 drilling campaign to be completed by year-end and will soon announce EPC tenders for both projects in November or December this year.
• The power plants with a capacity of 55 MW each are targeted to start operating in 2025, delayed from the original schedule of 2024 by the company and 2023 by PLN.

Star Energy Rig Procurement for Exploration

• Star Energy is reportedly applying for an extension of the Gunung Hamiding exploration license which will expire in December later this year. Thus, the drilling plan which was originally scheduled for this year, will be pushed back to February next year once the company secured the new permit.
• As of the date of this report, it remains uncertain whether Star Energy has awarded a contract to a drilling contractor for the project. If this has not been executed, Petromindo estimates that Star Energy will soon make an announcement regarding the procurement of a drilling rig for the project, given the recent scarce supply of drilling rigs in the country.

Supreme Energy to Secures 2 Long-Awaited PPAs from PLN

• PT Supreme Energy is currently finalizing the negotiation of Power Purchase Agreement (PPA) for its Muara Laboh expansion dan Rajabasa project with PLN.
• Supreme’s top official told Petromindo recently that the two PPAs are expected to be signed by the end of this year. The company however, did not disclose the electricity price deal with PLN.
• Petromindo believes that the electricity price would be lower than the $13 cents/kWh agreed for Supreme’s Muara Laboh Unit-1. The ongoing negotiation, which has spanned nearly five years, indirectly indicates PLN's commitment not to accept a selling price that is higher than or equal to that of Muara Laboh Unit-1.
• From Supreme Energy's side, it is most likely that they will pursue technological breakthroughs to align with PLN's purchasing capability and ensure the economic viability of both projects. Based on Petromindo's records, Supreme Energy has held several meetings with power technology providers such as ORMAT and Baker Hughes, indicating a potential shift towards adopting more efficient and cost-effective new technologies.

Tender for PLN’s WKPs

• PLN plans to hold tenders in November of this year for two additional geothermal working areas as the utility seeks partners to help accelerate the development of geothermal projects in the country.
• The two geothermal working areas are the Gunung Sirung (5 MW) in East Nusa Tenggara Province and the Danau Ranau (40 MW) in Lampung Province.
• In this collaboration, PLN will appoint its subsidiaries, PLN Indonesia Power and/or PLN Nusantara Power, to collaborate with the partners and jointly manage the geothermal power projects.

Petromindo Research
Inquiry: research@petromindo.com