Ormat Technologies signs finance deal for Indonesian power plant

The Sarulla project will bring Israeli-invented technology to the world’s largest Muslim country

An Ormat geothermal plant in Iceland (Photo credit: Courtesy)
An Ormat geothermal plant in Iceland (Photo credit: Courtesy)

Israel and Indonesia don’t have diplomatic relations, but soon Israeli technology will be providing electricity to citizens of the world’s most populous Muslim country. This week, Ormat Technologies, a US-based holding company,  announced that it signed a $1.17 billion financing agreement with an Indonesian group that is building the huge 330-megawatt Sarulla geothermal project in Tapanuli Utara, North Sumatra, Indonesia. The geothermal technology was developed in Israel by Ormat.

Financing is expected to be finalized by the second quarter of 2014, and construction of the project is expected to begin in 2016. Eighteen months later, said Ormat, the plant should be operational. Ormat will supply the energy converters for the project, worth $254 million. The contract to build the plant was signed in 2007.

Commenting on the deal, Dita Bronicki, chief executive officer of Ormat Technologies, said the company “will continue the effort to close this financing and ultimately, supply clean, reliable electricity to the Indonesian market.”

The Sarulla project, as it is known, is being managed by a consortium including Indonesian energy company Medco, Japanese conglomerate Itochu, and the Indonesian subsidiary of Japan’s Kyushu Electric Power, along with Ormat, which owns 12.75% of the project. The financing is being done by the Japan Bank for International Cooperation (JBIC) and the Asian Development Bank (ADB), serving as the lead structuring banks, along with six commercial banks, the Clean Technology Fund and the Canadian Climate Fund. Electricity produced by the plant will be sold to Indonesia’s national electricity utility company, Perusahaan Listrik Negara, under a 30-year contract.

Ormat, which has been in business for 40 years, sells turnkey power generation systems based on its Ormat Energy Converter, a power generation unit that converts low-, medium- and high-temperature geothermal heat into electricity. The company is one of the biggest in the business, building geothermal power plants around the world, with 1,100 employees, 600 of them in the US, and operating in 24 countries around the world.

Last year, for example, Ormat refurbished the Mammoth G1 geothermal power plant in Mono County, California. In September, Ormat entered into an agreement with eBay to build a geothermal plant in Utah, which will supply power to the company’s new Salt Lake City-based data center. And the company recently completed construction of a plant in New Zealand that is the largest geothermal plant in the world.

In 2013, Ormat was named Israel’s Exporter of the Year by the Economics Ministry, with the award given not just for the company’s activities during the year, but in recognition of its role as being a world leader in the establishment of geothermal energy systems, the Ministry said.

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