In consideration for the acquisition of CPC's interest in the joint venture agreement, the Company has issued 1,000,000 common shares to CPC in conjunction with this transaction. Under the regulations, the shares are fully paid and non-assessable at a deemed price of $1.70 per common share. Unless permitted under securities legislation, the CPC cannot trade the shares until October 24, 2006.
North Sumatra Power Plant Project
CPC has assigned to the Company its 51% controlling interest in its joint venture agreement with PT Cahaya Sakti (?PTCS?) of Medan, Indonesia. Under the joint venture agreement, a joint venture company will be formed to construct a 3 x 35 MW coal fired power plant (the ?Project?) in Medan, North Sumatra.
The Project has all of the major approvals and documents in place for the Project, including the Power Purchase Agreement (?PPA?), Long Term Fuel Supply Agreement, and Environmental Permits.
The general terms of the PPA are as follows:
? The term of electrical power sales is for 20 years. The electrical power, amounting to 438,000,000 kilowatts per hour (kW-hr) per annum is to supply the Medan Industrial Estate.
? The sale price of electricity is approximately US$0.05/kW-hr for the first year through to the third year; thereafter; it will be increased by 2% per annum for the minimum contract amount.
? The sale price for electrical power in excess of the minimum amount contracted is approximately US$0.04775/kW-hr; thereafter, it will be increased by 2% per annum.
The estimated capital cost of the power plant is about US$110 million. The financing will be negotiated and arranged through PT Credinvest International Indonesia (?PTCII?) with ?AAA? Banks - Islamic Development Bank (?IDB?) / Islamic Corporation for the Development of the Private Sectors (?ICD?) ? Jeddah, Saudia Arabia who will provide the remainder of the project value in an 30%/70% Equity/Debt ratio.
The loan facility would include an equity position with the following conditions:
Total Project Cost: US$ 110 million
Condition for Eligibility: 30% equity and 70% debt
Total Financing Amount: Up to US$ 77 million
ICD Contribution: Up to US$ 15 million, of which up to US$ 5 million would in the form of equity and US$ 10 million debt (the debt and equity percentage will be subject to ICD Board approval)
The 30% equity portion of the project cost or approximately US$ 33 million would be funded as follows: the Company, on behalf of the joint venture company, would be required to raise and contribute US$ 6 million, ICD would provide US$ 5 million, and the balance of US$ 22 million or 20% would be funded by coal in kind (approximately 1.5 million tonnes) from PTT. Under the financing arrangement proposed by IDB/ICD, the only financial obligation of the Company would to provide an equity payment of US$ 6 million.
Under the terms of the financing facility offered by IDB and ICD, the power plant project would be leased to the joint venture company until the principal and interest was repaid in full, at which time ownership would be transferred to the joint venture company.
The value of the 3 x 35 MW coal-fired power plant project, as measured by the total installed cost, is US$ 110 million, and the anticipated revenue for the base year is about US$ 37 million as stated in the SNC Lavalin report. The net income for the Company for the base year is estimated to be about US$ 16 million. A foreign investment company called PT Cahaya Ona Power is incorporated as the joint venture company to carry out this project in Indonesia with Ona Power and Energy Corporation, a wholly owned subsidiary of Ona Exploration Inc.
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