The PPAs for both phases of power generation end in 2022 as the PSC expires in 2022 - this is described in the annual report. You cant have the PPA without the gas. It is not clear whether the second phase is subject to a separate IPP concession or not, but there is gas allocated to it.
If the generation equipment must be transferred in 2022 this has not been disclosed in any annual report to date. Further someone forgot to tell El Paso who negotiated the contract, and Medco the 5% co-investor in the project. If Graham Elliot is correct - and the transfer is a requirement then the company is guilty of material non-disclosure as the Indonesian Power segment is responsible for 70% of revenues and 66% of EBITDA .
The Indonesians changed the regulations with regard to IPP concessions this year - making all future IPP concessions BOOT schemes. Most, but not all gas fired IPP concessions were made were issued as BOOT. But PTES got its concession in 1997 - and the indications of interest were being invited as BOO schemes at least to 1993.
As there is no indication that whether the BOOT will be retrospective - but that seems unlikely. Elliot's comments may apply to the IPP concession extension, or it may apply to the new rules. However it is applies to the current extension - this is a materially adverse development and needs to be disclosed.
From Medco's prospectus - note they believe the project is a BOO scheme.
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Sengkang Electricity Power Plant
In October 2003, the Company entered into a conditional sale and purchase agreement with PT Trihasra Sarana Jaya Purnama (‘‘Trihasra’’) for the purchase of Trihasra’s 5% shareholding interest in PT Energi Sengkang (‘‘Energi Sengkang’’). Energi Sengkang is currently the operator of the Sengkang Electricity Power Plant located in Sengkang, South Sulawesi. Sulawesi Energy Pty Ltd (‘‘Sulawesi Energy’’) is currently the holder of the remaining 95% shareholding interest in Energi Sengkang. In January 2005...
The 135 MW gas-fired power plant was built on a **** Build-Own-Operate (‘‘BOO’’) ****basis, and came on line in September 1997. The plant is currently the largest thermal power plant on the island of Sulawesi and, under a gas purchase agreement, natural gas is delivered via pipeline to the combined cycle gas power station which has been built approximately 30 kilometers southwest of its source gas field, the Kampung Baru field.
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Presidential Decree No. 37/1992 (Private Power Enterprise for Electricity Supply) - Invites private investors to “Build, Own and Operate (BOO)” power generating plants and transmission and/or distribution networks.
Regulation No. 02.P/03/M/PE/1993 jo No.04.P/03/M.PE/1995 (Guidelines for Implementing Private Sector and Cooperative to Supply Electric Power for Public Use.) Comprehensive policy framework to guide reform and restructuring of the power sector. Issues stipulated: - Private power enterprises supplying electricity will be prioritised on Build, Own and Operate (BOO) basis.
2.1 All projects to be developed on a BOOT basis
Regulation 10/2017 (art. 4(3)) provides that all IPP projects must be developed on the basis of a build, own, operate and transfer (BOOT) scheme, where the IPP is required to transfer the ownership of the relevant project to PLN at the end of the term of the PPA. Although most Indonesian IPP projects are already effectively developed under the BOOT scheme (such as coal and gas-fired projects), this was not necessarily the case of certain geothermal and hydro projects which were developed under a build, own and operate (BOO) basis. These BOO projects entail the possibility for the IPP to negotiate an extension to the PPA as the generation asset is not meant to be transferred to PLN for a nominal value at the end of the term of the PPA, and therefore allow the IPP sponsors to further improve their return on investment. It now seems clear that such BOO projects will no longer be available in the future.
Further, Regulation 10/2017 also provides that the maximum term of PPAs is 30 years with the exact term depending on the type of power generation.
EWC Price at posting:
34.0¢ Sentiment: None Disclosure: Held
(20min delay)
