Andalas Energy and Power #ADL announces new IPP Project, Gas Sales MOU and Joint Venture

Andalas Energy and Power plc (AIM:ADL) is pleased to announce that it has signed a gas sales memorandum of understanding, with a private Indonesian company, for the supply of gas to a new independent power project and commenced discussions with the Indonesian national power company, PLN, regarding procurement of the generating capacity.  Sumatra-1 will be co-developed with PT Sinar Era Gemilang in accordance with a newly signed joint venture agreement with SEG for the development of independent power producer (“IPP”) projects in Indonesia.

Andalas and SEG have undertaken preliminary grid stability and demand studies for a 40MW IPP at Sumatra-1.  After preliminary discussions with PLN, Andalas and SEG have agreed to prepare and submit a written proposal requesting PLN commence procurement of the generating capacity which would include negotiation of a power purchase agreement.  The terms of the proposal will be refined after further discussions with PLN.

Simon Gorringe, CEO of Andalas Energy & Power, commented, “The Sumatra-1 IPP represents further solid progress. It not only develops and strengthens our project portfolio of IPPs but also diversifies operational and counter party risk, being our first non-Pertamina project. It also underlines the potential for IPP projects in Sumatra, where there are available gas resources, experienced development partners, accessible grid infrastructure and power demand. 

“Our joint venture with SEG will bring significant benefits to both parties.  SEG’s understanding of the power market combined with our understanding of the gas market enhances our ability to identify and secure further power projects and we expect it will reduce third party development costs.  We expect the joint venture to be a nimble decision maker able to deliver outcomes against short timetables.” 

Sumatra-1 Project & Gas Sales MOU Details

• Sumatra-1 is the name used by Andalas for the proposed 40 MW gas-fired wellhead IPP located in South Sumatra.
• Andalas and SEG’s preliminary grid stability and demand studies conclude the transmission system is capable of evacuating power from the IPP and there is a market for it within PLN.
• Gas Sales MOU provides that the parties will seek to agree a gas sales agreement for the supply of 6 MMscfd for a period of at least 15 years at such price as qualifies the project for direct appointment (i.e. without public tender) in accordance with Indonesian laws and regulations.The Gas Sales MOU enables Andalas to progress discussions with PLN.
• A written proposal, together with grid stability and demand feasibility studies, is being prepared and expected to be submitted to PLN shortly.If PLN accepts the proposal, we expect the project to be either included in the Indonesian Electricity Business Plan (“RUPTL”) or progressed as a small power project.We would expect then to enter into further discussions regarding the technical features of the proposal, pre-qualification of the participants and then to negotiate a power purchase agreement.

SEG Joint Venture Details

• SEG is a wholly owned subsidiary of PT Synergy which provides professional engineering and construction services to the energy sector.Its power systems business undertakes power system studies for industrial, utility and commercial customers, power system design planning and optimisation and operational trouble shooting, electrical safety audits and data management.The Synergy group signed a power purchase agreement with PLN on 2 August 2017 for the development an Indonesian solar project.
• Andalas and SEG signed joint venture agreement to co-develop gas-fired wellhead IPP projects.
• Each party will contribute its respective expertise to the joint venture at its own cost and the parties will share agreed third party costs in proportion to their respective participation interests (Andalas 80%; SEG 20%).
• The expertise of Andalas and SEG will enable the joint venture to efficiently identify, evaluate and secure power projects.

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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**ENDS**

Glossary:

IPP                   independent power producer

MMscfd             million standard cubic feet per day

Pertamina         PT Pertamina (Persero)

PLN                  PT PLN (Persero)

RUPTL              Rencana Usaha Penyediaan Tenaga Listrik is Indonesia’s electricity business plan.  It contains demand forecasts, future expansion plans, electricity production forecasts, fuel requirements and indicates which projects are planned to be developed by PLN and independent power project investors.