KUALA LUMPUR--Malaysia's Genting Bhd (3182.KU) said Tuesday that one of its units will build a power plant in Indonesia at a cost of about $1 billion, as the group seeks to broaden its footprint in Southeast Asia's largest economy.
Genting's unit, PT Lestari Banten Energi, has signed an agreement to sell Indonesia's state-owned utility PT PLN (Persero) power for 25 years from a planned coal-fired, 660-megawatt plant in Banten, West Java, the company said in a stock exchange filing.
"The project represents an opportunity for the Genting Group to make its maiden investment in the Indonesian power sector and thus expand its power generation portfolio regionally," the company said in the statement.
Genting, with operations ranging from casinos to plantations, currently produces power in Malaysia through privately held unit Genting Sanyen Power Sdn, whose pact to sell electricity to state-run Tenaga Nasional Berhad will end in 2015.
The proposed Indonesian project underscores Genting's recent push to expand beyond Malaysia. Last month Genting sought to raise its 10% stake in Australia's Echo Entertainment Group Ltd. (>> Echo Entertainment Group Ltd), which holds an exclusive license to operate casinos in New South Wales until 2019.
According to PricewaterhouseCoopers, electricity demand in Indonesia--whose economy is forecast to grow 6.5% this year--should expand 7%-9% a year for the next few years. It estimates Indonesia will demand 167 terawatt hours by 2014, and its generation capacity is expected to be at 194 terawatt hours in the same period.
PT Lestari Banten Energi will build, own, operate and transfer the Banten plant to Indonesia's PLN for a nominal amount, Genting said.
Three-fourths of the project's cost will be funded through debt, while the remainder will be pumped in as equity investment, it said.