China Development Bank to bankroll 614MW Indonesian coal project

China Development Bank, a Chinese state-owned lender,  inked a deal to bankroll Indonesian power producer Sumber Segara Primadaya’s plan to build a coal-fired plant in Central Java.

The funding for the plant, to be built in Cilacap with a total capacity of 614 megawatts, is the latest sign of interest in Indonesia’s economy from China.

Muhammad Rasul, the president director of Sumber Segara, said that the project would be financed through a $700 million loan from China Development Bank, as well as internal cash.

He added that the company also expects to secure another loan from state-controlled Bank Rakyat Indonesia, the country’s second-largest lender.

Rasul said the China Development Bank granted the loan facility without collateral and without a government guarantee. He added that as part of the terms of the loan, the power plant will use Chinese-made equipment and machinery.

“The power plant construction will be completed within 36 months and is scheduled to commence operation in 2016,” Rasul said, adding the power plant would be connected to the Java-Bali power grid.

Zhao Fan Qiang, an executive from the China Development Bank, said the Chinese lender was in the process of increasing its lending capabilities toward developing countries in Asia, Africa and South America. Indonesia is the lender’s top pick in the region due to its strong and stable growth. “Across the world, Indonesia is a darling of investors,” Zhao said.

Jero Wacik, the energy and mineral resources minister, welcomed the lender’s quick decision in providing the loan for the project, saying that the financial closing took place within two months while it would usually take around a year.

“It shows that the Chinese have no worries [toward Indonesia],” he added.

Sumber Segara is a joint venture between Sumber Energi Sakti Prima and Pembangkit Jawa-Bali, a subsidiary of state utility Perusahaan Listrik Negara. It currently controls and operates a 2×300 megawatt coal-fired power plant in Cilacap.

PLN, which is responsible for providing power to the country’s 240 million people, currently has a generating capacity of 30,000 megawatts. That puts the electrification rate — the proportion of homes with access to power — at 70 percent. The government has been aiming to boost the rate to 90 percent within a few years.

PLN has been asked by the government to supply an additional 55,500 megawatts nationwide by 2019 and increase the electrification rate to 90 percent by 2020.

PLN expects electricity demand to reach 328.3 terawatt hours (TWh) in 2020, more than double last year’s figure of 162.4 TWh. In its working plan, PLN states that at least $60 billion is needed to meet soaring demand.

The government has laid out plans to increase the country’s electricity capacity by about 20,000 megawatts in two separate fast-track programs, of which the first focused on the country’s huge coal reserves.

PLN expects to boost its power capacity by a sixth, or an additional 5,000 megawatts, this year.