Jakarta. Asian Development Bank or ADB announced Tuesday that it had inked a financing deal worth totaling $92.6 million (Rp 1.5 trillion) for a geothermal power generation project in West Sumatra.

The international lender had signed the agreement with geothermal firm Supreme Energy Muara Laboh (SEML). This is a joint venture established by Japanese investment firm Sumitomo Corporation, Tokyo-based oil company Inpex, and an Indonesian renewables company Supreme Energy.

ADB said around $38.8 million of the arranged finance package would come from the bank’s ordinary capital resources. About $38.8 million is set to be sourced from a syndicated ADB B Loan from Sumitomo Mitsui Banking Corporation with the former acting as the lender on record. ADB revealed that the remaining $15 million would be a concessional loan from the Australian Climate Finance Partnership (ACFP). The ACFP is an ADB-managed concessional blended financing facility that gets funded by the Australian government.

“This project will help to reduce greenhouse gas emissions and promote sustainable energy solutions that will enhance the country’s long-term energy security. It is critical for the private and public sector to work together in advancing geothermal development,” ADB’s country director for Indonesia Jiro Tominaga said.

ADB is not the only bank to finance this geothermal expansion project that can eventually power 900,000 households in Sumatra Island.

A syndicate of other financial institutions comprising Japan Bank for International Cooperation (JIBC), Mizuho Bank, Sumitomo Mitsui Banking Corporation, MUFG Bank, and Hyakugo Bank is joining ADB in this loan scheme. The loans from the private financial institutions get covered by overseas untied loan insurance provided by Japanese insurance corporation NEXI.

SEML will use the freshly secured funding to set up a 83-megawatt new geothermal plant on a site adjacent to an existing 85-megawatt unit that already entered commercial operation in late 2019. 

According to Sumitomo Corporation, the construction work for the second unit will begin this year. Its commercial operation is expected to start in 2027. The estimated total project costs stand at approximately 70 billion yen or about $443.4 million.

SEML has also signed a power purchase agreement with the state-run electricity firm PLN. This deal will be effective until 2052. The construction of an additional unit of up to 66 megawatt is also in the pipeline.

The Muara Laboh geothermal project is backed by the Asia Zero Emission Community (AZEC) -- a carbon neutrality platform that brings together ASEAN members (except Myanmar), Japan, and Australia. 

The loan announcement came not long after Japanese Prime Minister Shigeru Ishiba paid a state visit to Bogor for some bilateral talks with President Prabowo Subianto. The two leaders had agreed to bolster energy cooperation to catapult Indonesia’s growth in a sustainable manner, according to Ishiba.

“I have confirmed our partnership on decarbonization and energy. … This includes the Muara Laboh plant under the AZEC framework,” Ishiba said.

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