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Project Financing for Rantau Dedap Geothermal Power Project in Indonesia
Supporting Japanese Companies in Expanding Renewable Power Generation Business in Collaboration with ADB and Other Financial Institutions

  • Region: Asia
  • Infrastructures
  • Environment
  • Project Finance
  • Overseas Investment Loans
March 28, 2018
  1. The Japan Bank for International Cooperation (JBIC; Governor: Akira Kondoh) signed on March 23 a loan agreement for project finance*1 amounting up to approximately USD188 million (JBIC portion) with PT Supreme Energy Rantau Dedap (SERD), an Indonesian company invested in by Marubeni Corporation, Tohoku Electric Power Co., Ltd., and other sponsors for the Rantau Dedap Geothermal Power Project in Indonesia. The loan is co-financed by private-sector banks including Mizuho Bank, Ltd., Sumitomo Mitsui Banking Corporation, the Bank of Tokyo-Mitsubishi UFJ, Ltd., as well as by the Asian Development Bank (ADB). Nippon Export and Investment Insurance (NEXI) provides insurance for the portion co-financed by the private-sector banks. The total co-financing amount is approximately USD539 million.
      
  2. In this project, SERD will construct, own and operate a geothermal power plant with a gross capacity of 98.4MW in South Sumatra, Indonesia. The electricity generated from this plant will be sold to PT PLN (Persero), a state-owned power utility in Indonesia, for a period of 30 years.
      
  3. This loan supports an overseas infrastructure project in which Japanese companies not only participate as investors, but also operate and maintain a power plant over a long period of time, using advanced Japanese technologies. This loan thereby contributes to maintaining and strengthening the international competitiveness of Japanese industries.
      
  4. In its "Export Strategy for Infrastructure System" revised in May 2017, the Japanese government expressed its intention to promote expanding orders for infrastructure systems, including the design, construction, operation and management of infrastructure, as well as increasing investments in local businesses. The government also announced its "overseas deployment strategy for the power sector" in October 2017, emphasizing overseas power generation business implemented by Japanese utility companies as a priority area in its policy. This overseas strategy states that the government will provide support for overseas power development projects through JBIC's financial instruments. Furthermore, the government's climate change policy, namely "Actions for Cool Earth: ACE2.0" announced in November 2015, aims to support developing countries which make efforts against climate change. This loan is in line with those policies of the government. This is the third geothermal IPP*2 project in Indonesia where JBIC has provided project financing, after the Sarulla geothermal power project*3 and the Muara Laboh geothermal power project*4. JBIC supports power projects in Indonesia  utilizing renewable energy including geothermal power.
      
  5. In order to respond to the country's surging electricity demand, which has increased in line with steady economic growth, the Indonesian government has committed to promoting its "35 GW power plants development plans", and this project is positioned as a part of that plan. The government has been actively promoting geothermal power generation, which taps into the country's rich geothermal resources, including the issuing of a new law for geothermal power production in 2014. By generating a steady power supply, which contributes to climate change mitigation, this loan is also expected to support Indonesia's economic development as well.
     
  6. As Japan's policy-based financial institution, JBIC will continue to financially support the expansion of overseas infrastructure business of Japanese companies, in collaboration with multilateral financial institutions, including ADB, 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 financing scheme in which repayments for a loan are made solely from the cash flows generated by the project.
  2. *2 
    An IPP (Independent Power Producer) is an independent producer of electric power who builds and operates electric power facilities, and makes electric power available for sale to power utilities.
  3. *3 
  4. *4 

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