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Asia Pacific Clean Energy Summit

Challenges and Opportunities
in Geothermal Development in New
Zealand and Indonesia

Jon Lorentz AECOM




August 2012
World Market for Geothermal Energy (WGC)

                                 Installed 2010       Forecast by 2015       Increase to 2015
         Country
                                     (MW)                  (MW)                   (MW)

Indonesia                              1179                  3500                 2300
USA                                    3087                  5400                 2300
New Zealand                             628                  1240                  610
Philippines                            1904                  2500                  600
Kenya                                   167                   530                  360              AECOM working in
Iceland                                 575                   800                  225              the Countries
                                                                                                    marked in Red
Mexico                                  958                  1140                  180
Chile                                     0                   150                  150
Nicaragua                                88                   240                  150
Turkey                                   82                   200                  120
Russia                                   82                   190                  110
El Salvador                             204                   290                   90
Italy                                   843                   920                   80
Ethiopia                                7.3                   45                    40
Costa Rica                              166                   200                   30
Papua New Guinea                         56                   75                    20
Japan                                   536                   535                   0

Geothermal Development in New Zealand and Indonesia     September 25, 2012                 Page 2
Wayang Windu Unit 2 120 MW Geothermal Power Plant, Indonesia


Geothermal Energy
                                                                           Geothermal power generation is based
                                                                           on established technology
                                                                           Average generation cost of geothermal
                                                                           is significantly lower than most other
                                                                           clean energy sources
                                                                           Geothermal generation costs are
                                                                           mostly effected by:
                                                                                The quality of the resource
                                                                                Financing terms
                                                                                The knowledge and experience of
                                                                                the development team.
                                                                           The cost of generation is comparable to
                                                                           gas combined cycle plants
                                                                           Geothermal has a capacity factor of
                                                                           over 90% (Wind is 30-40%) making it
                                                                           ideal for base load power generation.
                                                                           It is renewable and relatively benign
                                                                           environmentally.

Geothermal Development in New Zealand and Indonesia   September 25, 2012                 Page 3
Project Risks
                                                                            Geothermal Risk
                                                                                 Resource risk
                                                                                 Reinjection risk
                                                                            Resource ownership and access risk
                                                                            Environmental and H&S risks
                                                                            Construction risk – Contracting
            Lahendong II 20 MW Geothermal Power Station, Indonesia          methodology (EPC Delivery)
                                                                            Financial risk – Financing structure
                                                                            Market risk – Security of Power
                                                                            Purchase Agreement (PPA)
                                                                            Country and political risk – Insurance
                                                                            available.
                                                                            Project management and technical
                                                                            development risk - Knowledge and
                                                                            experience.



Geothermal Development in New Zealand and Indonesia    September 25, 2012                 Page 4
   Wayang Windu Unit 2 120 MW Geothermal Power Plant, Indonesia
The Project Cycle – Risk and Reward
Ex World Bank Presentation


                                                            The Valley of Death!




                                                      Equity          Debt




                                                         Bankability
Geothermal Development in New Zealand and Indonesia      September 25, 2012        Page 5
The New Zealand Geothermal Market

                                                                           New Zealand power market – no
                                                                           incentives for geothermal
                                                                           A long history of Geothermal
                                                                           investment in exploration and test wells.
                                                                           Most developments have been
                                                                           associated with “brown-field” sites.
                                                                           Resource knowledge reduces
                                                                           development risk.
                                                                           New Zealand Govt. Has fully funded
                                                                           geothermal projects (Ohaaki and
                                                                           Wairakei.
                                                                           Indigenous Maori have invested in
                                                                           many smaller developments.
                                                                           Large scale developments:
                                                                                MRP (SOE) in “JV” with Maori
                                                                                Contact Energy – Private sector
                                                                                corporate.


Geothermal Development in New Zealand and Indonesia   September 25, 2012                 Page 6
New Zealand – Planning and Permitting

                                                                           Resource Management Act – based on
                                                                           the principle of Sustainable
                                                                           Development
                                                                           Resource consent application
                                                                           Environmental Impact Assessment
                                                                           Public consultation
                                                                           Public Notification & submissions
                                                                           Council hearings
                                                                           Appeal process – lodged with the
                                                                           Environment Court
                                                                           Time frame:
                                                                                Application preparation 2 years
                                                                                Council hearings 1 year
                                                                                Another 1-2 years if appeal to
                                                                                Environment Court


Geothermal Development in New Zealand and Indonesia   September 25, 2012                 Page 7
Tauhara North No. 2 Trust Geothermal Development

                                                                           Tauhara North No.2 Trust established
                                                                           to manage the Tauhara land block on
                                                                           behalf of the indigenous Maori owners.
                                                                           Trust vision: Hold fast to your land;
                                                                           make use of your land; for future
                                                                           generations.
                                                                           34.5 MW Rotokawa GPP (Operating)
                                                                           In 1999, established a JV with MRP
                                                                           (Major power utility) & purchased the
                                                                           rights to Ngatamariki
                                                                           140 MW, Nga Awa GPP (Online 2010)
                                                                           82 MW Ngatamariki GPP. (Online 2013)
                                                                           80-110 MW Rotakawa GPP extension
                                                                           planned.
                                                                           2012 the Trust increased equity in Nga
                                                                           Awa from 10% to 35%.



Geothermal Development in New Zealand and Indonesia   September 25, 2012                  Page 8
Indonesia Geothermal Market

                                                                            Approximately 80 million people in
                                                                            Indonesia have no access to electricity
                                                                            Generation is predominantly coal and
                                                                            gas and electricity is subsidised.
                                                                            Indonesia has a geothermal resource
                                                                            potential of 27,500MW (T > 250 C). 44
                                                                            Projects in development.
                                                                            Exploration, test wells and 1st Plant
                                                                            funded through NZ AID.
                                                                            Development issues:
                                                                                 State Electricity Co. is the single
                                                                                 buyer – favour coal.
                                                                                 Sovereign risk.
                                                                                 Land ownership and access.
                                                                                 Concessionaires have difficulty
                                                                                 raising equity exploration.


Geothermal Development in New Zealand and Indonesia
                                          Geothermal Steamfield Pipe 2012
                                                         September 25,                     Page 9
                                          Reroute, Papua New Guinea
Indonesia - Planning and Permitting

                                                                           Structured environmental reporting:
                                                                               EIA
                                                                               Environmental Base Line Report
                                                                               Environmental Management Plan
                                                                               Environmental Monitoring Plan
                                                                           Decision making by central
                                                                           Government (Ministry of Mines and
                                                                           Energy).
                                                                           Limited third party input into decision
                                                                           making
                                                                           Use of Environmental Standards
                                                                           Emphasis on environmental
                                                                           management and monitoring.
                                                                           Ability to vary permits




Geothermal Development in New Zealand and Indonesia   September 25, 2012                 Page 10
Indonesia - Development Progress

                                                                     Indonesia Government Sector
                                                                           Exploration by earlier donor support
                                                                           Pertamina Geothermal Energy (PGE)
                                                                           State Oil Co. funded exploration
                                                                           World Bank, Asian Development Bank,
                                                                           KfW, JBIC, assisted in funding projects
                                                                     Indonesia IPPs
                                                                           Chevron with PGE
                                                                           Supreme Energy – JV with GDF Suez
                                                                           and Sunitomo (JBIC)
                                                                           Star Energy – Funding off balance
                                                                           sheet.
                                                                           Origin / Tata JV. Funding off balance
                                                                           sheet.




Geothermal Development in New Zealand and Indonesia   September 25, 2012                Page 11

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Hawaii geothermal presentation august 2012 rev2

  • 1. Asia Pacific Clean Energy Summit Challenges and Opportunities in Geothermal Development in New Zealand and Indonesia Jon Lorentz AECOM August 2012
  • 2. World Market for Geothermal Energy (WGC) Installed 2010 Forecast by 2015 Increase to 2015 Country (MW) (MW) (MW) Indonesia 1179 3500 2300 USA 3087 5400 2300 New Zealand 628 1240 610 Philippines 1904 2500 600 Kenya 167 530 360 AECOM working in Iceland 575 800 225 the Countries marked in Red Mexico 958 1140 180 Chile 0 150 150 Nicaragua 88 240 150 Turkey 82 200 120 Russia 82 190 110 El Salvador 204 290 90 Italy 843 920 80 Ethiopia 7.3 45 40 Costa Rica 166 200 30 Papua New Guinea 56 75 20 Japan 536 535 0 Geothermal Development in New Zealand and Indonesia September 25, 2012 Page 2
  • 3. Wayang Windu Unit 2 120 MW Geothermal Power Plant, Indonesia Geothermal Energy Geothermal power generation is based on established technology Average generation cost of geothermal is significantly lower than most other clean energy sources Geothermal generation costs are mostly effected by: The quality of the resource Financing terms The knowledge and experience of the development team. The cost of generation is comparable to gas combined cycle plants Geothermal has a capacity factor of over 90% (Wind is 30-40%) making it ideal for base load power generation. It is renewable and relatively benign environmentally. Geothermal Development in New Zealand and Indonesia September 25, 2012 Page 3
  • 4. Project Risks Geothermal Risk Resource risk Reinjection risk Resource ownership and access risk Environmental and H&S risks Construction risk – Contracting Lahendong II 20 MW Geothermal Power Station, Indonesia methodology (EPC Delivery) Financial risk – Financing structure Market risk – Security of Power Purchase Agreement (PPA) Country and political risk – Insurance available. Project management and technical development risk - Knowledge and experience. Geothermal Development in New Zealand and Indonesia September 25, 2012 Page 4 Wayang Windu Unit 2 120 MW Geothermal Power Plant, Indonesia
  • 5. The Project Cycle – Risk and Reward Ex World Bank Presentation The Valley of Death! Equity Debt Bankability Geothermal Development in New Zealand and Indonesia September 25, 2012 Page 5
  • 6. The New Zealand Geothermal Market New Zealand power market – no incentives for geothermal A long history of Geothermal investment in exploration and test wells. Most developments have been associated with “brown-field” sites. Resource knowledge reduces development risk. New Zealand Govt. Has fully funded geothermal projects (Ohaaki and Wairakei. Indigenous Maori have invested in many smaller developments. Large scale developments: MRP (SOE) in “JV” with Maori Contact Energy – Private sector corporate. Geothermal Development in New Zealand and Indonesia September 25, 2012 Page 6
  • 7. New Zealand – Planning and Permitting Resource Management Act – based on the principle of Sustainable Development Resource consent application Environmental Impact Assessment Public consultation Public Notification & submissions Council hearings Appeal process – lodged with the Environment Court Time frame: Application preparation 2 years Council hearings 1 year Another 1-2 years if appeal to Environment Court Geothermal Development in New Zealand and Indonesia September 25, 2012 Page 7
  • 8. Tauhara North No. 2 Trust Geothermal Development Tauhara North No.2 Trust established to manage the Tauhara land block on behalf of the indigenous Maori owners. Trust vision: Hold fast to your land; make use of your land; for future generations. 34.5 MW Rotokawa GPP (Operating) In 1999, established a JV with MRP (Major power utility) & purchased the rights to Ngatamariki 140 MW, Nga Awa GPP (Online 2010) 82 MW Ngatamariki GPP. (Online 2013) 80-110 MW Rotakawa GPP extension planned. 2012 the Trust increased equity in Nga Awa from 10% to 35%. Geothermal Development in New Zealand and Indonesia September 25, 2012 Page 8
  • 9. Indonesia Geothermal Market Approximately 80 million people in Indonesia have no access to electricity Generation is predominantly coal and gas and electricity is subsidised. Indonesia has a geothermal resource potential of 27,500MW (T > 250 C). 44 Projects in development. Exploration, test wells and 1st Plant funded through NZ AID. Development issues: State Electricity Co. is the single buyer – favour coal. Sovereign risk. Land ownership and access. Concessionaires have difficulty raising equity exploration. Geothermal Development in New Zealand and Indonesia Geothermal Steamfield Pipe 2012 September 25, Page 9 Reroute, Papua New Guinea
  • 10. Indonesia - Planning and Permitting Structured environmental reporting: EIA Environmental Base Line Report Environmental Management Plan Environmental Monitoring Plan Decision making by central Government (Ministry of Mines and Energy). Limited third party input into decision making Use of Environmental Standards Emphasis on environmental management and monitoring. Ability to vary permits Geothermal Development in New Zealand and Indonesia September 25, 2012 Page 10
  • 11. Indonesia - Development Progress Indonesia Government Sector Exploration by earlier donor support Pertamina Geothermal Energy (PGE) State Oil Co. funded exploration World Bank, Asian Development Bank, KfW, JBIC, assisted in funding projects Indonesia IPPs Chevron with PGE Supreme Energy – JV with GDF Suez and Sunitomo (JBIC) Star Energy – Funding off balance sheet. Origin / Tata JV. Funding off balance sheet. Geothermal Development in New Zealand and Indonesia September 25, 2012 Page 11