- Region: Asia
- Infrastructures
- Environment
- Overseas Investment Loans
- Project Finance
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The Japan Bank for International Cooperation (JBIC; Governor: HAYASHI Nobumitsu) signed on January 10 a loan agreement with PT Supreme Energy Muara Laboh (SEML), an Indonesian company invested in by Sumitomo Corporation and INPEX Corporation, etc. JBIC will provide project financing*1 amounting to up to approximately USD138 million (JBIC portion) for the Muara Laboh geothermal power expansion project in Indonesia. The loan is co-financed with private financial institutions (Mizuho Bank, Ltd., MUFG Bank, Ltd., Sumitomo Mitsui Banking Corporation, and The Hyakugo Bank, Ltd.) and the Asian Development Bank (ADB), bringing the total co-financing amount to approximately USD370 million. Nippon Export and Investment Insurance (NEXI) will provide the insurance for the loan by the private financial institutions.
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In this project, SEML will expand the power generation capacity of the Muara Laboh geothermal power project, which is currently generating approximately 85 MW in South Solok Regency, West Sumatra Province, Indonesia, by approximately 83 MW. The electricity generated will be sold to PT PLN (Persero), a state-owned power company in Indonesia, until 2052.
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In the Infrastructure System Overseas Promotion Strategy 2025, supplemented in June 2023, the government of Japan, in its support of the transition to net-zero and decarbonization, has established a policy of providing support for quality energy and electricity infrastructure that harnesses sophisticated technologies to reduce the burden on the environment in a way that is compatible with the energy policy of host countries. In addition, in the outline of a new strategy looking ahead to 2030, which was approved in June 2024 by the Ministerial Meeting on Strategy relating to Infrastructure Export and Economic Cooperation, the government aims to respond flexibly by taking social changes, such as green transformation (GX) and digital transformation (DX), as opportunities. The loans are in line with these policies and will financially support overseas infrastructure projects that Japanese companies have invested in and will be involved in the operation and management for the long term, thereby contributing toward maintaining and improving the international competitiveness of Japanese industry.
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In January 2022, the government of Japan proposed the concept of the Asia Zero Emissions Community (AZEC), a framework to provide support and cooperation for efforts for energy transition by Asian countries by leveraging the strengths of Japanese companies, such as their technology and expertise. Indonesia is an important partner country in the AZEC framework, and the loans provided by JBIC are in line with the policy of the Japanese government. In addition, the loan aligns with the Just Energy Transition Partnership (JETP), which was agreed on by the government of Indonesia and its partner countries, including Japan and the United States, in November 2022.
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The government of Indonesia positions RUPTL 2021–2030, the new electricity supply plan released in October 2021, as the cornerstone for achieving carbon neutrality by 2060. Additionally, it announced a policy to actively introduce renewable energy. It plans to increase the proportion of renewable energy in the country's energy mix to 23% by 2025 and 31% by 2050. By 2030, it aims to have more than 50% of the capacity of newly developed power sources come from renewable energy, with approximately 8% of the total coming from geothermal energy. Of this renewable energy, approximately 60% will be from independent power producer (IPP) businesses*2. The loan conforms with the energy transition policy of the government.
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As Japan's policy-based financial institution, JBIC, in collaboration with international leading institutions such as ADB, will continue to provide financial support to assist Japanese companies in developing their overseas infrastructure businesses by drawing on its various financial instruments and schemes for structuring projects as well as performing its risk-assuming function.
Note
- *1 Project finance is a financing scheme in which repayments for a loan are made solely from cash flows generated by the project.
- *2 An IPP (Independent Power Producer) is an independent producer of electric power who builds and operates power facilities, and generates electric power available for sale.