Andalas Energy and Power Plc First Wellhead IPP Consortium Agreement

 
TIDMADL 
 
Andalas Energy and Power Plc 
 
                         ('Andalas', or the 'Company') 
 
   Signs First Indonesian Wellhead IPP Consortium Agreement with State-Owned 
                                  Enterprise 
 
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. 
 
Highlights: 
 
  * 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. 
 
Power Sales 
 
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. 
 
Next Steps 
 
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. 
 
For further information, please contact: 
 
David Whitby    Andalas Energy and Power Plc               Tel: [phone] 
                                                           2316 
 
Sarah Wharry    Cantor Fitzgerald Europe                   Tel: [phone] 
                (Nominated Adviser and Joint Broker)       7000 
 
Jon Belliss     Beaufort Securities Limited                Tel: [phone] 
                (Joint Broker)                             8415 
 
Frank Buhagiar  St Brides Partners Limited                 Tel: [phone] 
Susie Geliher                                              1177 
 
                                   **ENDS** 
 
Notes for Editors: 
 
PT PP (Persero) Tbk ("PTPP") - Indonesia's state owned engineering and 
construction group 
 
PTPP is the parent company of PT PP Energi ("PPE").  PTPP, is an Indonesian 
state-owned enterprise that is listed on the Indonesian Stock Exchange with a 
market capitalisation of approximately US$1.4 billion and generated revenue of 
US$1.2 billion in 2016.  The PTPP group is one of the largest construction and 
investment groups in Indonesia and is considered a preeminent engineering 
procurement and construction ('EPC') contractor of Indonesian independent power 
producer projects.  PTPP group has a strong relationship with the national 
power company, PLN, having constructed 14 power projects for PLN totalling 
2,168 MW since 2012. 
 
PT Pertamina (Persero) ("Pertamina") - Indonesia's World Class National Oil 
Company 
 
Today Pertamina is ranked 230 on the Global Fortune 500 of companies generating 
over US$41 billion in revenue and with some US$45.5 billion in assets in 2015. 
It has interests in over 230,000 square kilometres of acreage, has over 5 
billion barrels of oil equivalent ('boe') in Proven + Probable (2P) Reserves, 
and in 1H 2016 its production reached 640,000 boe per day, equating to over 50% 
of Indonesia's total hydrocarbon production. 
 
Pertamina's business is fully integrated and includes a significant power 
business.  Pertamina are the lead developer of the recently approved Jawa-1 
(1,760MW) power plant and have a further 235 MW of geothermal power plants in 
operation or being commissioned throughout Indonesia. 
 
PT PLN (Persero) - Indonesia's National Utility 
 
PLN is a state-owned company responsible for the majority of Indonesia's power 
generation.  It has exclusive powers over the transmission, distribution and 
supply of electricity to the public and it is responsible for the procurement 
of independent power production. 
 
PLN employs circa 51,000 employees across the archipelago and PLN's total 
generating capacity (produced by many different plants across Indonesia) at 31 
December 2015 was reported at around 40,265MW. 
 
PLN is focusing their efforts and investments to fulfilling the Governments 
ambitious targets of adding 35,000 MW of generating capacity by 2019 in order 
to increase the electrification ratio of Indonesia to levels comparable with 
other ASEAN nations. 
 
 
 
END 
 

(END) Dow Jones Newswires

August 08, 2017 02:00 ET (06:00 GMT)