Jakarta. The Japan-backed geothermal project in West Sumatra can finally begin building its second unit soon after it reached a financial close for its expansion, when Former Japanese Prime Minister Fumio Kishida visited Jakarta on Monday.

The first phase of the geothermal plant -- run by the multinational Supreme Energy Muara Laboh (SEML) -- already entered operations in late 2019. SEML is a joint venture that unites Japanese investment company Sumitomo Corporation, Tokyo-based oil producer Inpex, and an Indonesian renewables firm, Supreme Energy. Its first unit boasts a net power generation capacity of approximately 85 megawatts (MW), according to Sumitomo’s data.

An expansion is now underway to build a second unit adjacent to the existing one as Indonesia seeks to embrace clean energy. During Kishida’s Jakarta trip, SEML inked a financial close agreement with the Japan Bank for International Cooperation (JBIC) on the second unit. 

For context, a financial close typically signals the start of construction as it means that the necessary financing is already in place. Senior minister Airlangga Hartarto told reporters later that day the investments for Muara Laboh had totaled “nearly $500 million”. He revealed that the financing would take place within the framework of the Japan-led decarbonization initiative: Asia Zero Emission Community (AZEC).

“AZEC has made a [financing] pledge of a certain amount [for the Muara Laboh plant expansion]. AZEC has committed to providing up to 4 quadrillion Japanese yen [approximately $27.8 billion] to finance Asia's renewable energy projects,” Airlangga said in a news conference.

“The second unit is set to enter operations in 2027,” he said.

Sumitomo Corporation holds a 50 percent stake in the Muara Laboh project. Inpex’s share stands at 30 percent, while Supreme Energy owns the remaining 20 percent. The second unit will have a capacity of at least 80 MW. There are plans to build a third 60-MW unit, which will begin operations in 2033.

Early this year, ADB inked a financing deal worth $92.6 million for Muara Laboh geothermal’s second unit. JBIC also announced it had signed a loan agreement with SEML in January to co-finance a loan with other financial institutions for the expansion. JBIC said at the time its portion in the financing stood at $138 million. 

In 2022, Former President Joko “Jokowi” Widodo had already inked a decree that laid out the cost calculations for geothermal-generated power. Eniya Listiani Dewi, a senior official at the Energy Ministry, said that the price of electricity sold by SEML’s new units would be based on this decree. SEML will sell the geothermal energy to the state-run utility firm PLN.