Hydropower

Luxemburg company divesting itself of Indonesian hydropower holdings

Velcan SA has sold its 7-MW Sukarame hydropower project located in South Sumatera, Indonesia, to an independent Indonesian power producer.

The amount of the sale was not publically released.

Velcan, a Luxemburg-based development company that operates hydroelectric concessions in emerging countries, made the announcement on Dec. 21. According to the company, it develops and operates hydroelectric projects in Brazil, India and Indonesia.

Citing disagreement with state-owned PT PLN Persero (PLN), Indonesia’s only authorized power purchaser, Velcan said divesting itself of Sukarame is a result of disagreement over power purchase agreements.

“Since March 2016, the construction of the [Sukarame] project was on hold due to acute tariff uncertainties and PPA unavailability,” said Velcan in its press release. “The Group had started in late 2015 the pre-construction activities, after an increase of the feed-in-tariff (USD 132 /MWh for the first 12 years, and USD 82.5 for the remaining 8 years), decided by the Ministry of Energy and Mineral Resources.”

According to Velcan, PLN said the FIT was too high.

In August 2017, new negotiations were held based on PLN’s local procurement cost of 76 cents per MWh, which Velcan says is “barely 60% of the tariff based on which the investment decision was initially taken.”

As a result of selling Sukarame, Velcan now says it has only one remaining project being developed in Indonesia, the 18-MW Redelong project.  Velcan said it “is having discussions with potential partners and investors for taking over the lead development in the Redelong project.”

In October, Velcan sold its 59-MW Meureubo 2 hydropower project, located in Aceh province, to a Hong-Kong based investor.

At the time of the transaction, Velcan said divesting itself of Meurebo 2 followed several months of administrative uncertainties that stalled the PPA process with PLN. Through PLN subsidiary PJB, PLN is a member of the consortium that purchased Meureubo 2 and owns 25%.

Indonesia is developing several projects.

Earlier this month HydroWorld.com reported PLN and German development bank KfW signed a $99.9 million agreement for the construction of the 45-MW Kumbih 3 hydropower project. PLN said it will fund $18.2 million for the project, which it estimates will cost about $118.1 million.

In October, Indonesia’s first ocean energy independent power producer, SBS Energi Kelautan, has announced it completed final investment decision with SBS International Ltd. to move forward with the 12 MW, Phase I of the 150-MW Nautilus marine energy project in Lombok.