Indonesian ferronickel producer PT Antam has signed a power supply deal for peak load capacity over five years with local firm PT Tamboli Energy, which is building a 20MW hydro power plant.

The run-of-river facility is to be built with four generation units on the Tamboli river in the Kolaka area, some 63km from Pomalaa, where PT Antam has a ferronickel smelter plant. Under the peak power contract, PT Tamboli Energy will make 15MW available over five years to the plant.

Under the contract, PT Tamboli Energy will plan, design, fund, build, commission, operate and maintain the hydro power plant. The company has appointed local firm PT Bukaka Teknik Utama as its engineering, procurement and construction (EPC) contractor. Financial terms of the contract were not available.

The contract gives PT Antam first rights to purchase three-quarters of the output from the 20MW hydro power plant at 5.65 US cents/kWh over the period. Current costs are more than double from diesel-fired generation. The new power supply deal should enable PT Antam to improve its profit margin on ferronickel production.

The contract is for an initial period of five years and upon its expiration can be reviewed and renegotiated. The balance of the output over the initial contract period will be available for sale to state power company PLN.

In a statement PT Antam said that while the proportion of energy contracted was a small share of its total demand, it is an important step to cut expensive thermal generation and shrink its carbon footprint. The deal is forecast to cut power costs at the plant by approximately 8%-10%, the firm added.