PROPARCO, DEG and FMO finance the energy sector in Indonesia
Singapore, 7th May 2012. Three leading European development finance institutions – PROPARCO (France), DEG (Germany) and FMO (Netherlands) – have together committed US$80m to PT Energi Sengkang for the 120 MW extension of an existing combined cycle power plant located in South Sulawesi, Indonesia.
These institutions, coordinated by PROPARCO and in close cooperation with a syndicate of commercial lenders, provided a 10-year non-recourse loan into the financing structure. The extended tenor, which goes well beyond that currently provided by internal commercial banks on an uncovered basis in the Indonesian market, will contribute to the overall financial sustainability of the project and completely eliminate borrower refinancing risk.
The original 135 MW combined-cycle plant was commissioned in 1997 and subsequently expanded to 195 MW in 2008. The current expansion plan, consisting of a 60 MW gas turbine and a 60 MW steam turbine, will contribute to a 61, 5% increase of total electricity output. The 305 MW post-expansion plant will supply more than one third of the output to the South Sulawesi grid. With an electrification ratio of just 58% and forecast growth in demand of 10% per annum, the Sengkang plant will be vital to regional socio-economic development. “Investment in the power sector is paramount for Indonesia. This project will contribute to increased efficiency and thus reduced electricity costs. We estimate that the additional 120 MW will allow 73,000 Indonesians in South Sulawesi to have access to electricity”, said Paul Heinemann, Head of DEG’s Representative Office in Indonesia.
Indigenous natural gas for the Sengkang plant is supplied by sister company Equity Energy Epic Sengkang via a 29 km underground pipeline. Increased use of gas will enable the national electricity company to become less dependent on costly and environmentally unfriendly diesel generators as well as diversify the country’s energy mix. Indonesia’s gas reserves - 6th largest in the world - have the potential to compensate for the country’s declining petroleum reserves. “This project financing will back Indonesia in its efforts to diversify its energy resources. It is in line with the new national energy policy based on growth in production capacity, improved electrification, a shift away from coal and a better balance between public and private power production”, adds Alan Follmar, Senior Investment Officer at PROPARCO.
“This project financing will help meet the growing domestic demand for electricity and will contribute to the development of cleaner forms of energy infrastructure in Indonesia”, said Georges Beukering, Senior Investment Officer at FMO. The increased efficiency of the second combined cycle unit will enable a reduction of 300 tonnes of CO2 per year when compared to the baseline energy mix.
PROPARCO is a Development Finance Institution jointly held by Agence Française de Développement (AFD) and public and private shareholders from the North and South. Its mission is to catalyze private investment in emerging and developing countries with the aim of supporting growth, sustainable development and the achievement of the Millennium Development Goals (MDGs). PROPARCO finances investments that are economically viable, socially equitable, environmentally sustainable and financially profitable. PROPARCO is one of the main bilateral development finance institutions in the world. It invests on four continents encompassing the major emerging countries and the poorest countries, particularly in Africa, and has a high level of requirements in terms of social and environmental responsibility. www.proparco.fr
DEG (the German investment and development company), member of KfW Bankengruppe, is one of the largest European development finance institutions. For 50 years, DEG has been financing and structuring the investments of private companies in developing and emerging market countries. DEG’s aim is to establish and expand private enterprise structures in developing and emerging countries, and thus create the basis for sustainable economic growth and a lasting improvement in the living conditions of the local population. http://www.deginvest.de
FMO (the Netherlands Development Finance Company) is the Dutch development bank. FMO supports sustainable private sector growth in developing and emerging markets by investing in ambitious entrepreneurs. FMO believes a strong private sector leads to economic and social development, empowering people to employ their skills and improve their quality of life. FMO focuses
on four sectors that have high development impact : financial institutions, energy, housing, and agribusiness. With an investment portfolio of EUR 5 billion, FMO is one of the largest European bilateral private sector development banks. http://www.fmo.nl