A deal leveraging advanced Japanese geothermal power technologies finally signed late at midnight, just before a summit meeting

A key project in the AZEC initiative highlighted at the Japan-Indonesia summit meeting

The advancement of renewable energy projects is a pressing issue for Indonesia, which aims to achieve carbon neutrality by 2060. To that end, the country is focusing on utilizing its abundant geothermal energy resources. One of its flagship facilities is the Muara Laboh Geothermal Power Plant, which went into commercial operation in December 2019. In a testament to its importance, the loan for the project to expand the plant was on the agenda at the Japan-Indonesia summit meeting held in January 2025.

SHIRAHAMA Manabu, Deputy Director of Division 3, New Energy and Power Finance Department I, Infrastructure and Environment Finance Group, who led the negotiations for this project financing agreement, reveals how nail-biting the situation was, saying, “The signing of this loan agreement was actually completed in the late hours at midnight before the summit meeting.”

This is one of the most important projects under the AZEC (Asia Zero Emission Community) initiative, which was proposed by the Japanese government to promote decarbonization across Asia. Several Japanese companies with expertise in geothermal power generation have invested in the project, and the financial institutions involved range from commercial banks to international institutions.

Moreover, since loan repayments rely solely on cash flows generated by the project, a detailed review of profitability was required for financing. Despite a tight schedule and a process involving multiple stakeholders, including discussions with the Japanese sponsor companies, JBIC was able to put the loan agreement together.

“Our work was not just providing a loan. From the initial formation stages of the project, we shared issues with the Indonesian government, working to solve them through discussions. We also served as a bridge between the Indonesian government and the Japanese companies,” he recalls, noting how JBIC is uniquely positioned as a policy-based financial institution to take an in-depth approach in advancing projects.

Unpredictable geothermal power business and a complicated loan agreement

Working with SHIRAHAMA to advance loan negotiations for the Muara Laboh Geothermal Power Expansion Project, YAMANISHI Minami, then an associate in Division 3 & 4, New Energy and Power Finance Department I, was in her fourth year at JBIC. From her first year, she was in charge of loan agreement management and project monitoring for the Muara Laboh Geothermal Power Plant Unit 1 before its expansion. As the only member of the loan negotiation team with knowledge of both the contract for Unit 1 currently in operation and the contract for the expansion project, she says, “The biggest concern was whether the expansion project would affect the currently operating Unit 1.”

As the expansion project requires additional high-pressure steam, a new well must be drilled on the same landsite as the existing unit. Geothermal power projects typically require drilling wells more than 3,000 meters deep, making it difficult to control the deeper, unseen layers.

When YAMANISHI was stationed at the Jakarta office as an overseas trainee, she visited the site of the geothermal power plant, which was located in a steep mountainous region eight hours away by car from the nearest airport. She says that she will never forget the words of a local engineer—“The underground world is a living thing.” Even with current technology, final results are unpredictable. Because of this, detailed discussions were held involving geothermal technology experts on how to prepare for and minimize impacts on Unit 1, incorporating such concept in the contract. Some of the final agreement documents went beyond 400 pages.

“With the agreement due to be signed by the time of the Japan-Indonesia summit meeting scheduled for the beginning of the new year, it was the busiest time in my whole life, dealing with the lawyers to finalize the contract details.”

Indonesia is a geothermal powerhouse, ranking second in the world in terms of resource potential. It plans to have renewable energy account for at least 50 percent of newly developed power capacity by 2030, with geothermal accounting for 8 percent of the total. The Indonesian government has high hopes for geothermal power generation, as it can provide stable power unaffected by weather.

Utilizing Japanese power generation tech in geothermal powerhouse Indonesia

As Japan has limited locations suitable for geothermal power development, Indonesia presents a huge opportunity for Japanese companies possessing relevant technology. According to SHIRAHAMA, “JBIC also plays a key role in dispelling doubts and concerns, as well as providing behind-the-scenes support so companies can establish operations.” He hopes that such projects will act as a stepping stone for Japanese companies to further overseas expansion.

The project required working closely with the Indonesian government, and negotiations were sometimes slowed while undergoing a change in the administration. Nevertheless, JBIC was able to keep the dialogue going through its connections with the Indonesian authorities. According to YAMANISHI, “Although there is much uncertainty surrounding projects in developing countries, I want to harness JBIC’s strengths in engaging with overseas governments to propose optimal solutions for our clients.”

SHIRAHAMA and YAMANISHI are looking to use what they learned from this project in the future to ensure that JBIC continues to be a go-to organization that can meet the changing needs of the times.

Press release on this project