No. STUDY OF THE COOPERATION POSSIBILITY ON POWER DEVELOPMENT PHASE 2 IN NORTH SUMATRA, INDONESIA FINAL REPORT November, 2010 JAPAN INTERNATIONAL COOPERATION AGENCY Commissioned firm TOKYO ELECTRIC POWER SERVICES CO.,LTD. OPS CR(10) 10-002 STUDY OF THE COOPERATION POSSIBILITY ON POWER DEVELOPMENT PHASE 2 IN NORTH SUMATRA, INDONESIA FINAL REPORT <Table of Contents> Map of the study target areas List of abbreviations Chapter 1 Objectives and Background of the Study 1.1 Objectives and Outlines of the Study................................................................... 1-1 1.2 Background of the Study...................................................................................... 1-2 1.2.1 Current Conditions of Power Supply in North Sumatra ....................... 1-2 1.2.2 Asahan Aluminum Smelting Business ................................................. 1-4 Chapter 2 Outline of the Study 2.1 Study Target Areas............................................................................................... 2-1 2.2 Related Agencies.................................................................................................. 2-1 2.3 Work Methodology and Prepared Reports ........................................................... 2-3 2.4 Study Work Schedule........................................................................................... 2-6 Chapter 3 Current Power Demand and Supply in North Sumatra 3.1 Power Demand and Supply and Existing Generation and Transmission Facilities......................................................................................... 3-1 3.1.1 Power Supply....................................................................................... 3-1 3.1.2 Existing Power Generation Facilities ................................................... 3-3 3.1.3 Existing Transmission Facilities .......................................................... 3-4 3.1.4 Power Supply Reliability..................................................................... 3-5 i 3.2 Power Demand and Demand Forecast ................................................................. 3-6 3.2.1 Power Demand ..................................................................................... 3-6 3.2.2 Demand Forecast.................................................................................. 3-6 3.3 Power Supply Plan............................................................................................... 3-10 3.3.1 Power Supply Operation Plan (RUPTL:2010-2019) ............................ 3-10 3.3.2 Power Supply Business Plan in Case of INALUM Plant Expansion.... 3-14 3.3.3 Transmission Line Construction Plan .................................................. 3-16 Chapter 4 Confirmation of Power Development Potential for Each Generating Mode 4.1 Coal-fired and Gas-fired Thermal Power............................................................. 4-1 4.1.1 Coal and Gas Underground Reserves................................................... 4-3 4.1.2 Required Supply of Coal and Gas for Power Generation..................... 4-7 4.1.3 Production Quantity and Sales Record................................................. 4-8 4.1.4 Conditions of Transport Infrastructure Development........................... 4-12 4.1.5 Environmental Measures...................................................................... 4-14 4.2 Geothermal Power Generation............................................................................. 4-16 4.2.1 Outline of Geothermal Resources in North Sumatra............................ 4-16 4.2.2 Geothermal Resource Potential in North Sumatra................................ 4-28 4.3 Hydropower Generation....................................................................................... 4-32 4.3.1 Outline of Hydropower Resources in North Sumatra........................... 4-32 4.3.2 Comparison of Construction Costs....................................................... 4-67 4.3.3 Outline of the Hydropower Master Plan............................................... 4-69 4.3.4 Outline of Hydropower Sites in RUPTL .............................................. 4-70 Chapter 5 Promising Development Sites for Each Generating Mode 5.1 Coal-fired and Gas-fired Thermal Power Generation .......................................... 5-1 5.1.1 Power Plant Development Sites ........................................................... 5-2 5.1.2 Scale of Power Resources Development .............................................. 5-3 5.1.3 Thermal Power Plant Construction and Operating Cost....................... 5-4 5.2 Geothermal Power Generation............................................................................. 5-7 5.2.1 Promising Area and Development Plans for Geothermal Power Generation in North Sumatra ........................... 5-7 5.2.2 Extraction of Promising Areas for Geothermal Development.............. 5-9 ii 5.3 Hydropower Generation....................................................................................... 5-11 5.3.1 Conditions for Extraction of Promising Hydropower Potentials.......... 5-11 5.3.2 Extraction of Promising Hydropower Sites.......................................... 5-12 5.3.3 Project Features of Promising Hydropower Sites................................. 5-13 5.4 Schedule for Start of Operation in Potential Development Options..................... 5-16 5.5 Environmental Study............................................................................................ 5-19 5.5.1 Forest Protection Areas in Indonesia.................................................... 5-19 5.5.2 Location of Promising Sites ................................................................. 5-20 Chapter 6 Confirmation of Systems concerning Power Resources Development and Power Plant Construction 6.1 Outline of the Legal Framework and Main Legal Systems in Power Resources Development............................................................................ 6-1 6.2 Legal Systems in the Electric Power Field........................................................... 6-7 6.2.1 New Electricity Law............................................................................. 6-7 6.2.2 Classification of Electric Utility Operators .......................................... 6-8 6.2.3 Electricity Tariffs ................................................................................. 6-9 6.2.4 Leasing of Transmission Lines............................................................. 6-10 6.2.5 Crash Program...................................................................................... 6-11 6.3 Legislation related to Geothermal Power Generation .......................................... 6-13 6.3.1 Related Laws and Regulations ............................................................. 6-13 6.3.2 Problems confronting Geothermal Energy Development..................... 6-14 6.4 Coal Development Legislation............................................................................. 6-15 6.5 Natural Gas-related Legislation ........................................................................... 6-17 6.6 Environment-related Legal Systems .................................................................... 6-17 6.7 Legal System concerning Investment and Business Operation............................ 6-21 6.8 Legal Issues in Securing Power Resources for INALUM Plant Expansion......... 6-23 6.9 Legal Procedures in Each Power Resource Mode................................................ 6-24 6.9.1 Case of Coal/Gas Development............................................................ 6-24 6.9.2 Case of Geothermal Development........................................................ 6-26 6.9.3 Case of Hydropower Development ...................................................... 6-30 iii Chapter 7 Promising Options for Power Supply 7.1 Procedure for Selecting Power Supply Options ................................................... 7-1 7.2 Examination of the Business Model..................................................................... 7-2 7.2.1 SWAP................................................................................................... 7-2 7.2.2 PPP Business........................................................................................ 7-2 7.2.3 IPP Business......................................................................................... 7-3 7.2.4 Captive Power and Private Power Generation...................................... 7-4 7.2.5 PLN Business....................................................................................... 7-4 7.3 Selection of the Power Supply Option ................................................................. 7-5 7.3.1 200 MW Supply Option (for INALUM plant expansion) .................... 7-5 7.3.2 400 MW Supply Option (200 MW for INALUM + 200 MW for Civilian Use).......................... 7-12 7.3.3 600 MW Supply Option (200 MW for INALUM + 400 MW for Civilian Use).......................... 7-20 7.4 Applied Business Model in the Electric Power Supply Options .......................... 7-27 Chapter 8 Economic and Financial Analysis of Power Supply Options 8.1 Operating Setup and Fundraising......................................................................... 8-1 8.1.1 JBIC Finance Schemes......................................................................... 8-1 8.1.2 ODA Loan Scheme .............................................................................. 8-4 8.1.3 Financing conditions and Interest Scenarios