Andalas Energy and Power plc (AIM:ADL) is pleased to announce that it has signed a legally binding Consortium Agreement (‘Agreement’) with PT PP Energi (‘PPE’), a subsidiary of PT PP (Persero) Tbk (‘PTPP’), the Indonesian state owned construction and engineering company, to develop the Jambi-1 30+MW independent gas-fired wellhead power facility in Jambi Province, South Sumatra, Indonesia and to procure gas from Pertamina, the global fortune 500 national oil company.
The Agreement represents a major milestone for Andalas as it is a binding agreement to develop the first of the three projects that were planned in the Framework Agreement signed between the Company and PPE on 17 July 2017.
- Andalas (49%) and PPE (51%) to co-develop Jambi-1 wellhead power project with first power targeted for end 2019
- The proposed facility will be a minimum of 30MW and is expected to generate revenue in excess of US$10m per annum (gross) for 20 years
- Next steps for Jambi-1 involve finalising the gas purchase terms, grid study evaluation and commencement of a FEED study
- Andalas and PPE will review project financing options with PPE’s existing Indonesian and international banking relationships
Andalas has presented a further two projects to PPE in accordance with its obligations under the Framework Agreement and further updates will be provided as appropriate
David Whitby, CEO of Andalas Energy & Power, commented,
“This Agreement is a value trigger event for Andalas. With our internal forecasts indicating project revenue in excess of US$10m per annum, the Jambi-1 project has the potential to transform the business and sets the platform to develop further power projects in tandem with PPE.
“PPE is a strong and motivated partner to Andalas, being the power division of PTPP, the state owned entity. Since 2012 the PTPP group has constructed over 14 power plants for PLN, the state electricity company, and we therefore believe their participation strengthens the consortium’s ability to deliver in the Jambi-1 project.
“Our work to date has identified a significant number of potential projects for development, with PPE, Pertamina and also with others. We are therefore confident that Jambi-1 will be the first of a series of similar opportunities for Andalas, as we seek to roll out our standardised gas to power development model and rapidly scale up the business.”
Overview of Jambi-1 Wellhead Independent Power Producer (“IPP”) Project
Andalas and PPE have agreed to develop an independent gas-fired power facility in the province of Jambi, Sumatra, Indonesia. Jambi-1 was selected as the first project following detailed technical evaluation and due diligence.
A preliminary assessment of the Jambi-1 project indicates a project with total installed capacity of 30MW base load with potential to offer PLN the opportunity to purchase additional generating capacity subject to negotiation. The precise size and configuration of the facility will be determined as part of the PLN procurement process and front-end engineering and design (“FEED”).
The power facility will be located adjacent to the proposed central processing facilities for the gas field supplying the project. The gas field is currently in production and a preliminary location has been proposed, which is located to the north-west of the two nearest substations. Previous studies have indicated that these substations have existing capacity to take power from this project.
Andalas and PPE propose to sell the power generated by the project to PLN.
The project is expected to qualify for direct appointment (i.e. without public tender) under Regulation No. 11/2017 (see prior announcement dated 27 February 2017). The power price under direct appointment is agreed with PLN through an open book negotiation that determines the price based on the capital and operating costs of the project and an economic return for the owners. The forthcoming FEED study is designed to provide the various cost components for the open book negotiation.
There are a number of key contractual, technical and financial project milestones to be achieved prior to the consortium making its final investment decision (“FID”). The consortium will commence execution of these milestones immediately, starting with a detailed project scoping study and the selection and appointment of the FEED engineer. Completion of FEED, which is the pre-curser to FID and construction, is being targeted for H22018. The Company will make further announcements on milestones in due course.
Consortium Agreement Terms
The key terms of the consortium agreement provide:
- PPE and Andalas establish a consortium for the purpose of developing an IPP facility;
- PPE shall have 51% and Andalas shall have 49% participation interest in the IPP project;
- The IPP facility shall be located at the wellhead;
- The parties will seek regulatory approval for the construction of the IPP facility in accordance with Regulation No. 11/2017 which provides that power projects may be procured without public tender if they meet certain requirements;
- Each party shall bear its own internal costs but third party costs shall be shared by the parties in proportion to their respective participation interests.
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 (‘MAR). Upon the publication of this announcement via a Regulatory Information Service (‘RIS’), this inside information is now considered to be in the public domain.
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