China Huadian Engineering has entered into a conditional term sheet agreement with Indonesian coal mining company Blackgold Natural Resources to develop a 600MW coal-fired power plant in Riau province, Sumatra.

China Huadian is a state-owned power engineering company, whose core businesses encompass high-tech product research and development, engineering design, general contracting, as well as energy technology research and services.

Singapore Stock Exchange-listed BlackGold Natural Resources is an Indonesian coal mining group, with a special focus on supplying coal to power plants located in Riau Province. The group has the rights to three coal concession in Riau.

BlackGold will be the supplier of coal to a series of planned mine-mouth power plants, which are called mine-mouth as the plants are built next to, or at the mouth of, the mines. Long-term Power Purchase Agreements are expected to be signed this month by Indonesian state-owned electricity company PT PLN (Persero).

The Riau-1 Project is one of these mine-mouth power plants listed in the 2017 National Electricity Supply Business Plan, with commercial operation date expected to start in 2020.

According to BlackGold, the signing of the conditional term sheet follows the late-December 2015 agreement with China Huadian, relating to its entry into a consortium that will take part in the bidding process.

The project, comprising two 300MW coal-fired units, will be realized via a joint venture between BlackGold subsidiary PT Samantaka Batubara, and China Huadian. The joint venture will design, build, operate and maintain the facility. China Huadian will own a 51% stake in the joint venture. The BlackGold subsidiary will own 44%, and a potential third-party affiliate will own 5%.

China Huadian will be appointed as the engineering, procurement and construction contractor, and the operations and maintenance contractor. It will also be responsible for finding debt finance.

Now that the joint venture is fully in place, it awaits the final decision on the award of the project contract by PT PLN.

“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,” says Blackgold Natural Resources CEO Philip Cecil Rickard.

If successful, PT Samantaka Batubara 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 30 years.

China Huadian is currently involved in project construction, investment, operation and maintenance of a number of power projects across Indonesia.

Photo: Blackgold-group.com