Chinese lender sole financier of $1.8bn Indonesian plant

China Development Bank has provided a $1.3 billion project financing package for the construction of the 2.1GW Jawa 7 coal-fired power plant in Indonesia’s Banten Province. 

The $1.8 billion project was awarded in December 2015 to a 70/30 joint venture between Hong Kong-listed power company China Shenhua Energy and Pembangkitan Jawa-Bali Investasi, a subsidiary of Indonesian state power utility PLN, according to a filing at the Hong Kong Stock Exchange. 

China Development Bank is the sole financier in the project, providing the financial package in one tranche with a tenor of 18 years. The remaining amount, which amounts to 30 percent of investment costs, is funded by the two project sponsors on a pro-rata basis. 

The coal-fired power plant, comprising two 1,050MW units, will take about 54 months to build. The first power generating unit is expected to become operational by 2020, China Shenhua said in the filing. The project has also secured a power purchase agreement with PLN for 25 years and will be transferred to the utility upon the end of contract. 

“The project is the largest Chinese-led power project to date in Indonesia and was awarded under the Indonesian government’s 35GW power programme,” said David Holme, a Jakarta-based partner at Linklaters. The law firm advised CBD on the project development and financing. 

The transaction structure is also “innovative”, according to the firm’s Hong Kong-based counsel Andrew Compton. He explained that the transaction did not involve either a business viability guarantee letter or an Indonesia Infrastructure Guarantee Fund guarantee – both customary offtaker credit support features on recent Indonesian power projects – to enable funding. 

The Indonesian government said in 2015 the country aimed to build 35GW of power generation by 2020. According to the plan, 62 percent of the capacity is to be produced by independent power producers, with the rest to be generated by PLN.