JAKARTA, INDONESIA: The Asian Development Bank (ADB) today signed a private sector financing package to support the construction of a 275-megawatt combined-cycle gas turbine power plant in Riau province in central Sumatra, Indonesia, to help secure the country’s energy future and provide communities with more affordable and reliable electricity.
The financing consists of a $70 million A loan from ADB’s ordinary capital resources and $82 million B loan from Sumitomo Mitsui Banking Corporation and MUFG Bank, with ADB providing a partial risk guarantee (PRG) to the participating commercial banks. The International Finance Corporation (IFC) will provide $50 million for the Riau Natural Gas Power Project in the first-ever cofinancing of an infrastructure project by ADB and IFC in Indonesia.
ADB will also administer a $20 million loan from the Leading Asia’s Private Sector Infrastructure Fund (LEAP), supported by the Japan International Cooperation Agency. Established in March 2016, LEAP’s mandate is to help fill financing gaps and increase access to finance for ADB-supported infrastructure projects in Asia and the Pacific.
“ADB’s involvement in the project has helped secure long-term commercial bank financing necessary for any large-scale infrastructure investment, which has remained a challenge in Indonesia,” said Infrastructure Finance Division Director for Southeast Asia, East Asia, and the Pacific at ADB’s Private Sector Operations Department Mr. Jackie B. Surtani. “ADB’s role as a lender and provider of PRG to the project’s B loan lenders will enable the project to mobilize a significant amount of long-term debt.”
The project is being implemented through PT. Medco Ratch Power Riau, a special purpose vehicle partially owned by PT. Medco Power Indonesia, a leading developer and operator of small and medium-sized independent power producers (IPP) in the country, and Ratchaburi Electricity Generating Holding Public Company Limited, Thailand’s largest IPP.
“ADB’s role was key in getting this transaction closed from the negotiation stage of the power purchase agreement to the structuring of the financing package,” said PT. Medco Power Indonesia Chief Executive Officer Mr. Eka Satria.
The plant is expected to provide stable and reliable power to the domestic grid, amounting to about 1,445 gigawatt-hour annually. The use of combined-cycle gas-fired power generation will improve the environmental sustainability of the current energy mix in Sumatra by displacing diesel and coal as fuels for electricity generation.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. In 2018, it made commitments of new loans and grants amounting to $21.6 billion. Established in 1966, it is owned by 68 members—49 from the region.