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Press Release
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Sunday, May 27, 2012

RM35m Federal grant for geothermal plant

KOTA KINABALU: Malaysia's first geothermal power plant project that would be built at Apas Kiri in Tawau is expected to have the capability of generating over 100 megawatt (MW) of electricity, once all its development phases are completed. Tawau Green Energy Sdn Bhd (TGE), the project's developer, is presently going for the phase one development of this project, which is expected to complete and begin operation in 2014, with a generation capacity of 30MW. The company is seeing the possibility of continuing to the following phases of the project's development, which would increase further the electricity generation capacity, once it has successfully achieved the objective of its phase one development.

    Its Managing Director, Ramzi Raad, told reporters this during a press conference after the signing of a Facilitation Fund Agreement between the company and Public-Private Partnership Unit of the Prime Minister's Department at the Ming Garden Hotel, here. Earlier, he together with the unit's Director-General Datuk Seri Dr Ali Hamsa, who represented the Federal Government, and Zakaria Saad, representing Bank Pembangunan Malaysia, which is entrusted with disbursing the grant, signed and exchanged the agreement documents. Tourism, Culture and Environment Minister Datuk Masidi Manjun was also there as guest of honour and witness to the ceremony. The RM35 million grant provided by the Federal Government to TGE under this agreement is meant to help fund construction costs of the project's preliminary infrastructure. The Apas Kiri geothermal prospect had been identified by the Minerals and Geosciences Department as having the potential for electricity generation through studies commissioned by the department in the early 1990s and more recently, in 2008-2009. The survey covered an area of about 50km centered around the Apas Kiri geothermal manifestations. This survey led to the discovery of sub-surface heat water field of 12 square kilometres at the northern half of the surveyed area.

    Based on this discovery, it is estimated that this area has potential for development of a geothermal power plant with the capacity of 67MW at a depth of 2.5km. The Apas Kiri area experienced volcanic activities about 1.5 million years ago, during the Pleistocene age. As such, the area is under-laid by the Pleistocene formation, predominately covered with sandstone, mudstone, siltstone, shale and lignite. TGE had earlier on signed a Renewable Energy Power Purchase Agreement (REPPA) with state utility Sabah Electricity Sdn Bhd (SESB) in November 2011, where under it terms, TGE will export 30MW to the Sabah Grid from its geothermal power plant for a 21-year concession period at a fixed tariff of RM0.21/kWh. This project, involving estimated capital expenditure of RM419 million with the preliminary infrastructure and interconnection accounting to almost RM120 million, is not only expected to reinforce SESB's generation capacity in Sabah's east coast but also enhance Malaysia's green energy portfolio and support greenhouse gas emission reduction initiatives.

    The project would also qualify to receive carbon credits under the Clean Development Mechanism of the United Nations Framework Convention on Climate Change. Its current development being undertaken by TGE would basically comprise preliminary infrastructure for access to the project site, steamfield development including geothermal exploration, 36MW (gross) power plant, 132kV interconnection to SESB Grid including transmission lines, new 132/33kV Main Intake Substation and extension of two existing SESB Main Intake Substations, and operation and maintenance of the steamfield and power plant.

    Thanking the Federal Government for providing financial assistance to TGE to help fund this capital intensive project, Ramzi said the grant would go a long way to ease the project's cash flow an partially cover initial infrastructure costs. Assuring there would be minimal impacts to the environment from the implementation of this project, he said the project would also not affect the Apas Kiri (volcanic) mud pool, which is one of places of attraction for visitors in the areas. The geothermal power plant project is one of strategic projects supported by the Facilitation Fund in Sabah, said Dr Ali, adding that altogether RM500m of the total RM2 billion allocation provided to the unit for this purpose went to the State. He said the Federal Government, under its Economic Transformation Programme (ETP), had reviewed TGE's project and qualified it to receive the grant as the project would not only exploit a renewable energy resource, thereby contributing to the Government's commitment to reduce greenhouse gas emissions, but would also help reinforce the state utility's generation capacity in the East Coast.

    Masidi, when asked, said the project is another proof to the world of the State Government's true commitment to the environment. "This shows that Sabah walks the talk in terms of environmental conservationÉSabahans should be proud of this," he said. Meanwhile, Ramzi said they have also entered into a shares Sales and Purchase Agreement with Vancouver (Canada)-based Continental Energy Corporation (CEC) to enable it to become a 10 per cent shareholder in TGE. CEC is listed on the OTC Bulletin Board in the United States and has been actively involved in the oil and gas industry, particularly in Indonesia. "As a new shareholder, Continental is expected to play a major role in our future success. Continental brings a considerable amount of valuable geological and drilling technical expertise to the table, in addition to its financial commitment," said Ramzi.

    He said Continental's technical expertise and its long track record of oil and gas-operating experience in nearby Indonesia is the perfect complement to TGE's proven expertise and experience in electrical power generation in Sabah. This transaction also demonstrates Continental's confidence in the technical and commercial viability of the project and will also contribute towards Foreign Direct Investment in Sabah, he said. Continental's CEO, Richard McAdoo, said the acquisition of a 10 per cent stake in TGE is a milestone event for the company and it represents that all important, first big-step of its planned expansion into the renewable electrical power generation sector in a high growth region.

Source from: Daily Express, Independent National Newspaper of East Malaysia
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