The Japan Bank for International Cooperation (JBIC; Governor: Akira Kondoh) signed on January 26 a loan agreement, for project finance*1, amounting up to approximately USD198 million (JBIC portion), with PT. Supreme Energy Muara Laboh (SEML), an Indonesian company invested in by SUMITOMO CORPORATION and other entities for Muara Laboh Geothermal Power Project. The loans are cofinanced by three private financial institutions, Mizuho Bank, Ltd., Sumitomo Mitsui Banking Corporation, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., as well as the Asian Development Bank (ADB), bringing the total cofinancing amount to approximately USD439 million. Nippon Export and Investment Insurance (NEXI) provides insurance for the portion cofinanced by the private-sector banks.
In this project, SEML will construct, own, and operate a geothermal power plant with a capacity of 80MW in the South Solok Regency in West Sumatra, Indonesia, and will sell electricity generated by this plant to PT. PLN (Persero), a state-owned power utility in Indonesia, for a period of 30 years.
This loan supports an overseas infrastructure project in which Japanese company 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.
This loan is also in line with the Japanese government’s strategy of promoting Japanese involvement in projects that include the design, construction, operation, and management of infrastructure. Furthermore, the same applies to “Actions for Cool Earth: ACE2.0”, announced in November 2015, which aims in assisting developing countries that are taking measures against climate change. This is the second project in which JBIC has provided project finance to a geothermal IPP*2 project in Indonesia, after the Sarulla geothermal power project*3.
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” for five years, from 2015 to 2019, 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.
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.