- Region: Asia
- Project Finance
- Overseas Investment Loans
The Japan Bank for International Cooperation (JBIC; Governor: Tadashi Maeda) signed on October 18 a loan agreement for project finance*1 amounting up to approximately USD604 million (JBIC portion) with PT Jawa Satu Power (JSP) and PT Jawa Satu Regas (JSR) for the Jawa 1 Gas-to-Power Project in Indonesia. The project financing is provided as part of JBIC's newly launched Global Facility to Promote Quality Infrastructure Investment for Environmental Preservation and Sustainable Growth (QI-ESG*2). Both JSP and JSR are Indonesian companies: the former invested in by Marubeni Corporation, Sojitz Corporation and PT. Pertamina (Persero), the state energy company of Indonesia; the latter by Marubeni Corporation, Sojitz Corporation, Mitsui O.S.K. Lines, Ltd., PT. Pertamina (Persero), and so on. The loan is co-financed by Mizuho Bank, Ltd., MUFG Bank, Ltd., and other banks. The total co-financing amount is approximately USD1,312 million, the portion co-financed by private-sector banks is covered by Nippon Export and Investment Insurance (NEXI).
In this Gas-to-Power Project, electric generation and gas-related facilities will be developed in an integrated manner in West Java, Indonesia. JSP will construct, own and operate a 1,760 MW gas-fired combined cycle power plant while JSR will construct, own and operate an offshore floating LNG storage and regasification unit (FSRU) to supply fuel to the power plant. The electricity produced by these facilities will be sold to PT PLN (Persero), a state-owned power utility in Indonesia, for a period of 25 years.
In its "Export Strategy for Infrastructure System" revised in June 2018, 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 trading 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. This loan, therefore, is in line with these policies of the government as it will contribute to Japanese industry maintaining and enhancing its international competitiveness by financially supporting those Japanese companies that invest in overseas infrastructure projects as well as operate and manage these facilities on a long-term basis.
At the 36th meeting of the Management Council for Infrastructure Strategy held on April 10, 2018, the Gas-to-Power Project, to which this loan is extended, was identified as one of the overseas initiatives that Japan should pursue. In addition, the Japanese government expressed its intent to support the expansion of LNG use in Asia. This Project, in which Japanese companies will be involved in LNG storage and regasification, is in line with the government's policy. In particular, its significance lies in the fact that this is the first project financing provided for gas-to-power projects to be implemented in Asia as well as the first time for JBIC to finance such a project.
JBIC launched QI-ESG on July 1, 2018. This facility is aimed to provide a wide range of financing support for infrastructure development which is expected to help to preserve the global environment. In addition, this will be the flagship project of QI-ESG as well as the first project in Asia under QI-ESG*3 for the purpose of preserving the global environment.
Also in this Project, gas turbines manufactured by General Electric Company will be installed. This arrangement was specifically noted in the joint statement of the Second Public-Private Sector Roundtable Discussion on U.S. - Japan Cooperation on Third Country Infrastructure, which took place on April 23, 2018.
Against the backdrop of the Indonesia's surging electricity demand, which has increased due to steady economic growth, the Indonesian government is moving forward with a plan to build an additional 56 GW of generation capacity over the next 10 years, including this Project. Furthermore, the government emphasizes gas-fired generation as a middle-load power source for sustainable electricity supply, with the intention of maintaining the proportion of gas power generation to the country's total power output at more than 20%. In view of this situation, this Project is thus considered to be congruent with Indonesia's electricity policy.
As Japan's policy-based financial institution, JBIC will continue to provide financial support to assist Japanese companies in expanding their overseas infrastructure business in collaboration with private-sector banks by drawing on its various financial facilities and schemes for structuring projects as well as by performing its risk-assuming function.
See Announcement on June 28, 2018.
See press release on October 22, 2018, for another project realized under QI-ESG.