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ADB bankrolls Indonesian geothermal energy with $109m

The Asian Development Bank (ADB) on Thursday, 26 January 2017 in Manila, The Philipines, signed a new $109 million financing package for the Muara Laboh geothermal power generation project in western Indonesia. The financing, which was approved in December 2016, is part of ADB’s efforts to scale up private sector-led infrastructure development in Asia and the Pacific and boost support for clean energy.

Muara Laboh

A rig is deployed at Muara Laboh geothermal project. Photo credit: Supreme Energy

The project will be one of the first transactions to receive funding from ADB’s newly established Leading Asia’s Private Infrastructure Fund (LEAP). The Fund is capitalised by $1.5 billion in equity from Japan International Cooperation Agency (JICA), and is managed by ADB’s Private Sector Operations Department. With the Muara Laboh approval and other recent LEAP financings, over $200 million of LEAP funds have been allocated.

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“This project demonstrates Indonesia’s commitment to meet increasing demand for electricity and support the development of renewable energy,” said Yuichiro Yoi, Senior Investment Specialist in ADB’s Private Sector Operations Department. “This transaction proves that the private sector will play a critical role in helping the country achieve both of these targets.”

On completion, the Muara Laboh geothermal facilities, located in West Sumatra, will generate 80 megawatts of electricity. Indonesia contains about 40% of the world’s geothermal reserves, making it an important resource for the country to achieve its commitments to reduce carbon dioxide emissions by 29% by 2030.

The assistance is funded by a $70 million loan from ADB’s own capital and a $19 million participation from the Clean Technology Fund (CTF), which provides middle-income countries with concessional resources for the demonstration, deployment and transfer of low-carbon technologies. ADB administers over $1.1 billion of CTF, one of the four programmes comprising the Climate Investment Funds.

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The project brings together an important set of geothermal project developers and financiers. The project company, PT Supreme Energy Muara Laboh, is a joint venture consisting of the Indonesian geothermal power developer, PT Supreme Energy; the Japanese trading and investment company, Sumitomo Corporation; and global energy leader ENGIE. In addition to ADB, financing is being provided by the Japan Bank for International Cooperation and a set of commercial banks under a guarantee from Nippon Export and Investment Insurance.

ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, ADB is celebrating 50 years of development partnership in the region. It is owned by 67 members – 48 from the region.

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