Taken from Proactive Investors.....Panax Geothermal to gain...

Taken from Proactive Investors.....

Panax Geothermal to gain followers as Mitsubishi enters Indonesian geothermal sector
Monday, October 22, 2012 by Bevis Yeo Mitsubishi Corporation taking a 20% stake in Star Energy Geothermal, which manages Indonesia’s largest geothermal power station, is proof that major players are starting to catch on to what Panax Geothermal already knows, the potential of the country’s geothermal sector. The move should assist to hoist Panax onto investor, industry and regional radars.
Panax Geothermal (ASX: PAX) belief in the Indonesia’s potential as a hot spot for geothermal power generation has received support from Mitsubishi Corporation taking a 20% in Star Energy Geothermal, which manages the country’s largest geothermal power station.

Star operates the 230 megawatt Wayang Windu geothermal plant in West Java. This plant is expected to undergo a US$500 million expansion to increase its electricity generation capacity to 420MW.

Besides marking the Japanese multi-national’s entry into Indonesia’s geothermal industry, Mitsubishi also plans to leverage its stake in Star to develop and operate multiple geothermal power projects in the country.

Indonesia has maintained a high rate of economic growth, and Java Island, where Indonesia’s population and industry is concentrated, is expected to see a 7% to 8% annual growth in demand for electricity in the coming years.

Accordingly, Indonesia has declared the development of new sources of power, including its estimated 29,000MW of world class geothermal reserves, as a national priority and is looking to develop new geothermal power plants with a total capacity of around 6,000MW by 2020.

This is expected to increase to as much as 10,000MW by 2025.

Mitsubishi plans to play a major role by taking full advantage of the experience it has accumulated in the power generating sector to date, and the know-how it expects to acquire through operating Wayang Windu.

Nor is Mitsubishi the only major player with an interest in Indonesia’s geothermal power sector.

BP is reported to be investigating the possibility of entering the sector and has been given the green light to conduct geothermal exploration surveys in 28 locations across Indonesia, joining fellow energy supermajor Chevron, which is already the largest geothermal producer there.

Panax

In light of these developments, it is clear that Panax’s plans to develop more than 300MW of geothermal power generation – about 155MW net – is based on sound principles.

Panax and its local partner PT Bakrie Power, are poised to execute Power Purchase Agreements for the Sokoria and Dairi Prime geothermal projects in Flores and North Sumatra, both of which have planned initial electricity generation capacity of 30MW.

These agreements will enable Panax to progress to finalising required project financing. It is already reviewing draft term sheets provided by a number of groups from Singapore, China and Europe.

Production at Dairi Prima is targeted to start by late 2013, coinciding with the expected start of lead and zinc production from PT Dairi Prima Minerals’ Dairi Prima lead/zinc underground mine in North Sumatra.

Analysis

Mitsubishi’s entry validates Panax’s entry into Indonesia’s geothermal power sector and highlights its potential to become a noteworthy player.