Velcan has completed the sale of its 7MW Sukarame hydropower project in South Sumatera to an Indonesian Independent Power Producer.Velcan has completed the sale of its 7MW Sukarame hydropower project in South Sumatera to an Indonesian Independent Power Producer.
The construction of the project has been on hold since March 2016 due to acute tariff uncertainties and PPA unavailability, Velcan said in a statement. Pre construction activities had originally started in late 2015, after an increase of the feed-in-tariff (US$132/MWh for the first 12 years, and US$82.5 for the remaining eight years), decided by the Ministry of Energy and Mineral Resources. However, according to Velcan, PLN (the state owned electricity company and sole authorized buyer in Indonesia) has refused to buy the power, claiming that such new FIT was too high.
Policy discussions have been going on and resulted in a new tariff in August 2017, which is now to be negotiated with PLN, and subject to a ceiling of 100% of the provincial BPP, which is PLN’s local procurement cost. In the West Lampung Regency, where the project is located, such BPP ceiling is of Rp 1034 per kWh. That means the maximum tariff for the Sukarame project that can be negotiated with PLN is US$76/per MWh, approximately 60% of the original tariff for which the investment decision was initially taken.
As a result of the divestment, Velcan now only has involvement in the 18MW Redelong hydropower project in Indonesia, and has said in a statement it is in discussions with potential partners and investors who could over the lead development in the this project as it cannot ‘economically justify’ having full operations in the country.
