Madhucon to set up Indonesia power plant

A consortium led by Madhucon Projects has received a letter of intent to set up 300 mw (2 x 150 mw) coal-fired power plant at south Sumatra in Indonesia. The mine-mouth project would be set up on a build-operate-transfer basis.

The project would come up close to a coal mine owned by PT Madhucon Indonesia at Dawas. This mine is expected to assure the supply of coal to the project and also offer significant cost benefits.

According to sources, the power project would cost about Rs1,800-2,000 crore. The company would achieve financial closure for the project in about a year’s time and would have another 36 months from there to complete the project. The company officials were not available for providing the details.

A special purpose vehicle would be incorporated to handle the power project and Madhucon Projects would hold about 65% stake in the SPV, while its other group companies would hold the remaining 35%.

However, Madhucon will have to sell the power produced to the Indonesia government-owned energy company PT PLN.

According to a communiqué from the company to the exchanges, the SPV would enter into a 25-year power purchase agreement with PLN.

The state-owned company has a monopoly over electricity distribution in Indonesia. Under the Indonesian laws, though the private companies are allowed to sell power to the consumers directly, they have to use PLN’s electricity network to reach the consumers.

Interestingly, the company’s Dawas coal mine spread in about 8,600 acre is expected to have significant coal reserves to the tune of about 900 million tonne.

The mine would commence production sometime in February 2012.

The company, which has a mining licence for Dawas site, would use the mined coal for its new power project and explore the possibility of exporting it to India.

Meanwhile, Madhucon Infra, a subsidiary of Madhucon Projects Ltd, is also setting up a 1,920 mw coal based power project near Nellore in AP. The construction of Phase I of 300 mw is said to be complete and is heading towards synchronisation.

The project, being set up by an SPV Simhapuri Energy, would enter into Phase II of another 300 mw sometime in August 2012. The company has applied for clearances for Phase III of 1,320 mw, which would commence activities in the second half of 2012.