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ADB commits US$175.3 million in geothermal energy development in Western Indonesia

ADB commits US$175.3 million in geothermal energy development in Western Indonesia

On Mar 26, the Asian Development Bank (ADB) signed
a loan agreement of approximately US$175.3 million with an Indonesian company
to support the second phase of a geothermal power project in Indonesia.

The geothermal power project is led by Indonesian company PT
Supreme Energy Rantau Dedap (SERD). The project is located in the South Sumatra
Province of Indonesia.

SERD is a joint venture consisting of the Indonesian
geothermal power developer, PT Supreme Energy; the Japanese trading and
investment company, Marubeni Corporation; the Japanese power utility Tohoku
Electric Power; and global energy leader ENGIE.

With an estimated 29,000 megawatt (MW) of potential in
geothermal power generation, Indonesia has 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 geothermal power project supported by ADB will help
Indonesia get closer to this goal, with SERD’s geothermal facilities expected
to generate more than 90 MW of electricity, which will power up to 130,000
homes, create jobs, and avoid over 400,000 tons of carbon dioxide emissions
every year by 2021.

In addition to ADB, the Japan Bank for International
Cooperation and three commercial banks under a guarantee from Nippon Export and
Investment Insurance are providing financing for the project worth
approximately US$188.8 million and US$125.9 million, respectively.

“This innovative, phased financing proves that adequate risk
allocation allows the private sector to successfully develop geothermal
projects in Indonesia,” said Yuichiro Yoi, Unit Head for Indonesia at ADB’s
Private Sector Operations Department.

“The project also demonstrates Indonesia’s strong commitment
to develop renewable energy sources to diversify its energy mix and reduce its
carbon emissions,” he added.

As part of the financing, ADB will also administer an
additional loan provided by the Clean
Technology Fund
(CTF), which is a rollover amount from an existing CTF
facility for the first phase of the project.

CTF is one of the four programs comprising the Climate
Investment Funds and provides middle-income countries with concessional
resources for the demonstration, deployment, and transfer of low-carbon
technologies. ADB administers over US$1.1 billion of CTF funding across
sovereign and non-sovereign operations.

The CTF loan for the first phase helped to confirm the
commercial resource size and allow the project to proceed to financing of
construction and operations.

The US$175.3-million deal adds to ADB's continued efforts to
scale up private sector-led infrastructure development and support clean energy
investments in the Asia and Pacific region.

The project is also in line with ADB’s commitment in addressing
the risks and mitigating the impacts of climate change in developing member
countries in the region.

Some of the similar projects in Indonesia
approved by ADB include the US$350 million financing for the landmark 320 MW
Sarulla Geothermal Power Development Project and the 80 MW Muara Laboh
Geothermal Power Generation Project, which reached financial close in 2014 and
2017, respectively, and are also supported by CTF.

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