The agreement was signed on Tuesday by Muhsin, the president director of PDPA, which is owned by the Aceh regional administration, and Irfan Zainuddin, the president director of PGE, a subsidiary of the state-owned oil and gas comoany PT Pertamina.
Aceh Governor Zaini Abdullah and President Director of PT Pertamina (Persero) Dwi Soetjipto were present at the signing ceremony.
The agreement was signed after two years of negotiation, head of the provincial mining and energy service T Syakur said.
Syakur said he had urged the two sides not to waste time in signing the agreement as there are still a lot of work to do after the agreement.
He said as the winner of the tender for the Seulawah Geothermal project, PGE is required to form a partnership with PDPA to build and operate the geothermal power plant (PLTP) in Seulawah Agam.
"The signing of the agreement is a key factor in the implementation of the project. We will soon inform BAPPENAS, the Energy and Mineral Resources Ministry and the Finance Ministry, and KFW ,as they have been awaiting the SHA as the evidence of seriousness of the two partners in carrying out the project," he said.
He said the next step is PT Pertamina Geothermal Energy and PDPA would establish a joint venture company to be called PT Geothermal Energy Seulawah (PT. GES) to implement the project.
Pertamina as the capital provider will have a 75 percent share with PDPA holding the remaining 25 percent.
The PDPA will pay for the share with a grant from KfW, a German government-owned development bank based in Frankfurt.
The PDPA-PGE partnership is a concept to BAPPENAS under the Public Private Partnership scheme.
The German government through KfW is expected to provide a loan of 56 million euro to finance the project.
Seulawah Agam concession, in the regency of Aceh Besar, around 50 km southeast of Banda Aceh, is estimated to have a geothermal reserve equivalent to 165 MW.
The first unit of PLTP would have a capacity of 55 MW . Explorations will cost around US$40 million, Vice President Corporate Communication of Pertamina Wianda Pusponegoro said.