Global Issue

Geothermal energy is a source of heat energy contained in hot water, steam, and rocks, along with associated minerals and gases that are genetically cannot be separated in a geothermal system. Geothermal energy is relatively environmental-friendly and contributes very little to the greenhouse gas emissions. Utilization of geothermal energy can also reduce dependence on fuel so it will save foreign exchange.

Indonesia has 40% of the geothermal potential in the world, scattered in 276 locations in Sumatra, Java, Nusa Tenggara, Maluku, to the west end of Papua. Indonesia is ranked third after the United States and the Philippines in terms of utilization of geothermal energy for electrical energy source. Currently, Indonesia has managed to take advantage 1,403.5 MW of the 29,038 MWe total geothermal potential in Indonesia.

In the National Energy Policy, the use of Renewable Energy (NRE) is targeted to reach 23% in 2025 and 31% in 2050. Therefore, the Ministry of Energy and Mineral Resources (ESDM), through the Directorate General of Renewable Energy and Energy Conservation, continuously optimizes NRE resource, such as geothermal. The efforts of optimizing the utilization of NRE is embodied in the Government policy, such as by the provisioning of interesting rates of tariff, fiscal and non-fiscal incentives, feasibility guarantees to PT PLN, and the launching of the 10,000 MW Fast Track program Phase II (FTP-2) in 2010, with the development target of Geothermal Power Plant as much as 3,583 MW until 2020.

Some of the constraints in the efforts of increasing the utilization of geothermal energy are licensing issues and legislation, considering that most geothermal areas are located inside protected forests, national parks, and conservation forests. The Act Number 21 year 2014 (The Law 21/2014) concerning Geothermal will facilitate

the solution of these constraints. The Law 21/2014 states that thegeothermal utilization is not considered as mining activity, therefore,it is permitted to be conducted in conservation forests through the Environmental Utilization Permit.

 Furthermore, the Company has followed the applicable rules and procedures appropriated by the Regulation of Forestry Minister Number 16 of 2014 Concerning the Guidelines for Forest Use And Borrow License (IPPKH) to get a recommendation to use Forest Area from the Local Government. The recommendation is used as a condition to apply for IPPKH. Therefore, the Company is optimistic about the prospects for geothermal businesses in Indonesia.

The efforts to improve competency of human resources in geosciences, engineering and commercial/economic are realized in the cooperation between the Company and Auckland Uniservices (HK) Limited (Uniservices). The Company’s personnel are tasked to participate in a joint Geothermal Magister program held by ITB and the University of Auckland, and Engineering Magister program at the University of Tulsa, USA.