(EnergyAsia, December 2 2014, Tuesday) — Indonesia’s Adaro Energy said it and China’s Shenhua have signed a memorandum of understanding (MOU) to develop a 2x300MW coal-fired power plant in East Kalimantan.

The project represents the Indonesian coal miner’s first venture into the power industry.

Through their subsidiaries, the two companies will establish a joint venture in Indonesia to develop coal-fired power plants that will likely be owned 51% by Shenhua Overseas and 49% by Adaro Power.

The MOU was signed in Jakarta last week by PT Adaro Energy president Mohammad Effendi who is also a Adaro Power (AP) director, China Shenhua Overseas Development and Investment Co Ltd chairman Kee Cheng Chye, and other company officials who also signed a separate memorandum to jointly develop coal and power projects.

The two companies will initially mine coal as feedstock for a proposed 2×300 megawatts (MW) coal-fired power plant as well as develop power transmission facilities. The power plant’s capacity is expected to be expanded to feed into the Kaltim-Kalsel-Kalteng grid.

The project will contribute to the Indonesian government’s plan to build 35 gigawatts (GW) of power capacityover the next five years, said Adaro. Most will use the country’s large reserves of low heat value coal.

Adaro’s President Garibaldi Thohir said: “Adaro Energy will contribute to the generation of high quality and affordable electricity for Kalimantan. Together with Shenhua, we will create maximum value from Indonesian coal, including boosting the economic development in Kalimantan and so contribute to national development. With this MoU, we remain on track to further develop Adaro Energy’s power division.”