Project Finance and Political-Risk Guarantee for Central Java Coal-Fired Power Generation Project in Indonesia
Supporting Japanese Companies’ Participation in Indonesia’s First Ultra-Supercritical Coal-Fired IPP project

• Region: Asia
• Infrastructures
• Overseas Investment Loans
• Project Finance

1. The Japan Bank for International Cooperation (JBIC; Governor, CEO: Hiroshi Watanabe) signed today a loan agreement amounting to approximately USD2,052 million (JBIC portion) with PT Bhimasena Power Indonesia (BPI), an Indonesian company invested in by Electric Power Development Co., Ltd. and ITOCHU Corporation etc., for the Central Java coal-fired power generation project in Indonesia. The loan, provided in project finance^*1 , is cofinanced with Sumitomo Mitsui Banking Corporation, The Bank of Tokyo-Mitsubishi UFJ, Ltd., Mizuho Bank, Ltd., Sumitomo Mitsui Trust Bank, Limited, Mitsubishi UFJ Trust and Banking Corporation, Shinsei Bank, Limited, The Norinchukin Bank, and two Singaporean entities, DBS Bank Ltd and Oversea-Chinese Banking Corporation Limited, with a total cofinancing amount of approximately USD3,421 million. JBIC provides political risk guarantee for the portion financed by private financial institutions.
    
2. In this project, BPI builds, owns, and operates the ultra-supercritical coal-fired power generation plant with generation capacity of 2,000MW (1,000MW × 2) in Batang Regency in Central Java Province, Indonesia. BPI will sell the generated electricity to PT PLN (Persero) for 25 years.
    
3. The loan is intended to support the overseas infrastructure project in which Japanese companies participate as investors and are engaged in the project’s operation and management over a long period of time, utilizing the advanced technologies of Japan. The loan thereby contributes to maintaining and strengthening the international competitiveness of Japanese industries. The project is also in line with the Japanese government’s strategy of promoting Japanese involvement in projects including the design, construction, operation, and management of infrastructure. Furthermore, it is Indonesia’s first ever IPP^*2  project of an ultra-supercritical coal-fired power generation, and introduces technologies which are not only efficient but environmentally-friendly.
    
4. In response to the increasing demand for electricity in Indonesia due to the country’s continued economic growth, the Indonesian government has been working on developing power infrastructure, such as by setting a goal to increase the power generation capacity by 35GW between 2015 and 2019. The Public Private Partnership (PPP) scheme has also been implemented in Indonesia with the aim of accelerating infrastructure development that is vital for the country. Under this scheme, PT Penjaminan Infrastruktur Indonesia (IIGF) was established in 2009 to provide guarantees for PPP projects together with the Indonesian government. This project is the first under this PPP scheme, and IIGF will provide the guarantee concerning PLN’s obligation stipulated by the power purchase agreement, together with the Indonesian government.
    
5. As Japan's policy-based financial institution, JBIC will continue to support the overseas infrastructure project deployment of Japanese companies by drawing on its various financial facilities and schemes for structuring projects and performing its risk-assuming function.

Note

1. *1 Project finance is a financial structure in which repayments for a loan provided for a project are made exclusively from the cash flows generated by the project, while security for the loan is limited to the project assets, rights and interests.
    
2. *2 An independent power producer (IPP) builds and operates a power generation facility on its own and sells the electricity generated from it.