MANILA/JAKARTA -- Aboitiz Power has abandoned a 110-megawatt geothermal project in Indonesia due to mounting costs, leaving local partner Medco Power as the lone developer of the renewable energy asset.
Aboitiz Power told the Philippine Stock Exchange on Tuesday that it has decided to withdraw from the project in Ijen, in the province of East Java, which it agreed to develop with Medco in September 2015.
"The slim hole drilling program was taking longer and costing more than we had originally provided for," the Philippine company said in a separate statement, adding that it "had reached a decision point that would require us to commit to substantially more money."
Aboitiz Power said it still intends to pursue feasibility studies on a 127MW hydropower project in the province of Central Sulawesi with SN Power and Energy Infranusantara.
Speaking with the Nikkei Asian Review in November, Aboitiz Power CEO Erramon Aboitiz had sounded optimistic about the Indonesian venture, saying the government is "willing to pay for a higher price in geothermal."
He also said the company had earmarked $500 million for expansion in Southeast Asia. The East Java project would have been Aboitiz Power's first greenfield geothermal project outside the Philippines.
Without going into details, Aboitiz Power said it would instead focus its resources on "other ongoing and pipeline projects."
The company, which aims to double its generating capacity to 4,000MW by 2020, recently won antitrust clearance to buy U.S.-based Blackstone Group's coal power assets in the Philippines for $1.2 billion -- one of the largest acquisitions in the country's energy sector.
Aboitiz Power shares fell 3.21% on Tuesday, while Manila's benchmark index dropped 1.46%.
Meanwhile, Medco plans to proceed with the project alone. "We always like to work with partners, but for now we are going to continue on our own," Fazil Erwin Alfitri, president of Medco Power Indonesia, told the Nikkei Asian Review.
The company is expected to finish drilling the second slim hole within a month. It would then drill more wells to confirm the amount of energy that could be generated from the ground. Construction of the power plant may start in 2019 and could be finished in 2021, according to the Medco executive.
"Our aim is 110MW," he said. "If the size is smaller, we need to go back to the government."