Preliminary Study on Valuation Methods for Geothermal Power Plant Asset Transfers in Indonesia

Abstract

One of the clauses in the Power Purchase Agreement between PLN and IPP, especially in the BOOT cooperation scheme, is the transfer of assets. However, there are no further rules regarding the mechanism of asset transfer and asset valuation, particularly for GPPs, which have high-cost structures but also high uncertainty, especially in the initial exploration phase. The absence of standard rules may lead to significant differences in the value of assets with similar technical characteristics. This paper will conduct an initial study on an appropriate asset valuation approach for GPPs, taking into account various factors. Based on the analysis, geothermal asset valuation should use a more integrated approach tailored to the project stage and consider many factors, including remaining operating life, both technical and economic, the level of risk inherent in each project stage, and the perception of fair value for both parties to the transaction.