Coal miner Blackgold Natural Resources has entered into a conditional term sheet agreement with China Huadian Engineering to develop a 2x300MW coal-fired power plant in Indonesia.
The power plant project dubbed as Riau 1 will be built in Riau province.
Through its subsidiary, PT Samantaka Batubara (PT SB), Blackgold will take part in joint development, construction, operation and maintenance of the Indonesian power plant with China Huadian.
According to Blackgold, the signing of the conditional term sheet comes after the 28 December 2015 agreement with China Huadian relating to its entry into a consortium that will take part in a bidding process to provide electric power to Indonesian-state owned utility, PT PLN (Persero).
Blackgold and China Huadian are set to form a joint venture (JV) company to carry out their operations at the proposed Riau 1 coal-fired power plant. They will be joined by a third partner which will have 5% in the JV while BlackGold and China Huadian will have stakes of 44% and 51% respectively.
Blackgold Natural Resources CEO Philip Cecil Rickard said: “The signing of this Term Sheet marks the next step forward for both parties as it irons out the salient terms of the proposed joint venture between the parties.
“Leveraging on the capabilities of China Huadian in power engineering and BlackGold’s expertise in coal mining, we look towards securing the award of the Bid for development of the Riau-1 Project.”
The joint venture will be established depending on the successful award of the bid by PLN to the PT SB, China Huadian consortium among other conditions.
If successful, PT SB will handle negotiations of the power purchase agreement with PLN. It will also become an exclusive supplier of coal to the Riau 1 power plant for a long term of 30 years.
China Huadian, on the other hand will handle the engineering, procurement and construction (EPC) and operations and maintenance tasks of the coal-fired power plant. It will also take care of securing the debt financing needed for the power plant project which is scheduled to begin commercial operations in 2020.
Last week, Blackgold revealed that it expects Riau-1 Project to be among the six mine-mouth power plants with which PLN will be signing power purchasing agreements this month.