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Indonesia’s 2GW coal-fired plant gets $3.35bn financing

The financing, provided by a group of Japanese lenders, will help Indonesia make one step closer to reach its 35GW target by 2019.

The Tanjung Jati B 5 & 6 expansion project has reached financial close with a $3.35 billion financing package from a group of lenders including the Japan Bank for International Cooperation (JBIC) and a string of commercial banks.

The lender syndicate comprises a $1.678 billion project financing from JBIC and the remaining of co-financing from Sumitomo Mitsui Banking Corporation, The Bank of Tokyo-Mitsubishi UFJ, Mizuho Bank, Sumitomo Mitsui Trust Bank, Mitsubishi UFJ Trust and Banking Corporation, the Norinchukin Bank and Singapore-based Oversea-Chinese Banking Corporation.

Nippon Export and Investment Insurance (NEXI) provides insurance for the part of the loan provided by private-sector financial institutions.

The 2GW project is developed by Indonesian company Bhumi Jati power, in which Japan’s Sumitomo Corporation, the Kansai Electric Power Company and Indonesia’s United Tractors hold a stake. Two coal-fired units of 1GW each will stand adjacent to the existing units 1 to 4, which have already a total capacity of 2,640MW. The new expansion will sell its output to the local state-owned power utility PLN for 25 years.

The project is part of the 35GW power generation programme promoted by the Indonesian government. The country looks to reach the target capacity by 2019 in response to the surging electricity demand from a population currently standing at over 250 million.

In addition to the coal-fired project, JBIC also provided part of a combined $59 million export loan to PLN to buy new facilities from Japanese companies for the construction of a 500MW Muara Karang gas-fired combined cycle power plant in Jakarta.

With increasing concerns over environmental issues and the signing of the COP21 agreement, many major financial institutions have reviewed their lending policies and restricted financing for coal-fired power projects. Financiers from Japan and China, however, remain a major funding source for such projects particularly in emerging markets, as part of their efforts to export power unit manufacturing.