Andalas Energy and Power Plc - First G2P Project Submitted for Government Approval

16 December 2016

Andalas Energy and Power Plc

(‘Andalas’, or the ‘Company’)

First Gas-to-Power Project Submitted for Government Approval

Andalas Energy and Power Plc, the AIM traded Indonesian focused energy company (AIM: ADL), is pleased to announce that it has submitted an application for its first gas to power project of 2 x 30MW (‘the Project’) to be included in the Republic of Indonesia’s Electricity Supply Business Plan (‘RUPTL’).  The application follows the signing of an agreement with PT Pertamina (Persero) (‘Pertamina’), Indonesia’s national energy company, to fast-track the commercialisation of proven gas fields within Pertamina’s acreage in Sumatra, via the roll-out of the Company’s gas to power strategy (see announcement of 1 September 2016 for further details).

First Gas to Power Project with Pertamina

• Project is in line with strategy to develop a portfolio of small (i.e. less than 100 MW) independent power producer projects (‘IPPs’) fired with gas from proven fields

  • Five IPPs totalling 250-500MW of installed capacity initially targeted

• Application is the culmination of over four months of intensive work by the Andalas and Pertamina teams and further validates Andalas' in-country expertise

• Submission completed following a process including identification and screening of Pertamina’s extensive inventory of discovered gas fields; assessment of regional electricity demand, grid infrastructure and capacity; gas resources evaluation and modelling; process design; financial modelling; and the completion of a feasibility study for a two x 30 MW project in tandem with the engineering division of PT PLN (Persero) (‘PLN’), Indonesia’s national electricity company

• A technical review is scheduled with PLN to obtain the required approval prior to the Project being presented to the Energy Minister for final approval for entry of the Project onto the RUPTL

• Initial preparations and discussions have commenced with major international contractors in respect of the front-end engineering and design (‘FEED’) phase, which will include design and tendering of major services and equipment, and will continue in the New Year with a view towards completion in 2017 ahead of construction

Project Finance

• Approval will significantly de-risk the Project, unlock value and open up multiple funding options including sale of part of its interest to third parties

• The Project will be project financed with discussions ongoing with equipment vendors and with the UK export trade agency

• Expressions of interest already received from industry participants and project finance specialists including power companies and power equipment suppliers who understand the energy dynamic in Indonesia and the inherent and future project value

Pipeline of Projects

• First project provides the model for Andalas to develop additional gas to power projects in Indonesia

• The first project with Pertamina is our primary focus due to the potential for first power and revenue generation to be fast tracked in cooperation with Pertamina

• Growing pipeline of identified gas discoveries that can support new generating capacity of between 50 and 100 MW per project, both in partnership with Pertamina as well as with third parties, including those at Tuba Obi East (‘TOE’), which remains in Andalas’ project inventory

Dave Whitby, CEO of Andalas, said, “To have submitted our first gas to power project for inclusion on to the RUPTL within four months of signing a cooperation agreement with Pertamina is testament to the calibre of our management team and its standing within Indonesia’s energy industry.  Approval of our application will be a milestone event for Andalas.  Together with the Project’s strong economics, fast pay-back and excellent revenue visibility, based on long term gas sales contracts, approval will also act as a value trigger event.  

As the co-originator of projects with Pertamina we have the option to farm down our interest in those projects to future consortium members to provide a source of capital to finance ongoing operations.  Our initial target with Pertamina is to originate five independent power projects totalling 250-500MW.  As we de-risk the first project, the path through which we will be able to bring additional projects through the engineering, procurement, financing and construction phases will continue to be proven.

In our view, Indonesian power represents one of the most attractive investment opportunities in energy in the entire ASEAN region.  Coupled with strong economic fundamentals, a supportive government and the support of national energy companies, Andalas expects to maintain its momentum in progressing its existing projects, whilst continuing to originate new projects.  In gas to power we have identified a company-making opportunity, one which we are focused on fully capitalising on.”

**ENDS**

For further information, please contact:

David Whitby	Andalas Energy and Power Plc	Tel: +62 21 2783 2316
Sarah Wharry Craig Francis	Cantor Fitzgerald Europe (Nominated Adviser and Joint Broker)	Tel: +44 20 7894 7000
Frank Buhagiar Susie Geliher	St Brides Partners Limited	Tel: +44 20 7236 1177