Economic Viability

The investment in the plant is appr. US$ 350,000 equivalent to US$ 1460 per kW.  This figure does not include costs of the feasibility study and designs provided by the Swiss engineers – Technical Assistance from Switzerland – and the management and supervision inputs by the investor P.T. Chakra. Usually these costs amount to 10-15% of the investment.

The cost breakdown shows the large proportion of the civil works. Costs of electro-mechanical equipment have been kept relatively low due to the procurement of the turbines from a local manufacturer.

When the project was considered first time in 1999, the price of diesel fuel was around Rp. 600 per litre (including delivery costs to the estate by bowser). With this price, the feasibility of the project was still doubtful at that time. However, in view of future price increases to be expected, the estate management decided to go ahead with the project.

Figure 1:  shows the diesel fuel price as it was estimated in 2000 in the feasibility study compared to the actual development till 2002 and future price increases already announced by the Indonesian Government.

Figure 2:  shows the unit cost in Rupiah per kWh for the electricity of the Minihydro plant (backed up by diesel genset) as compared to the unit cost of the electricity produced by diesel genset alone. In addition to the effective unit cost by the Dewata Minihydro (i.e. based on the actual investment of US$ 350,000 or US$1460 per kW), the hypothetical cost curves for higher investment costs of US$ 1500, 2000, 2500 and 3000 per kW are also given. These figures demonstrate clearly that Minihydro is a feasible power option even with higher investment cost for those cases where the conditions are less favorable as in the Dewata project.

The internal rate of return (IRR) - a measure indicating the commercial viability of a project - was above 20% for the Dewata project already in the feasibility study undertaken in 2000, taking a lifespan of the plant of 20 years. It has substantially improved after calculated on the higher diesel price. The pay-back period of the investment stands at 5-6 years.