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ADB leads financing to expand Indonesia geothermal project
Generating capacity to reach 170MW, benefit 900,000 households on Sumatra Island
Michael Marray   22 Jan 2025

The Asian Development Bank ( ADB ), Japan Bank for International Cooperation ( JBIC ), and a group of commercial lenders have signed a financing agreement with PT Supreme Energy Muara Laboh ( SEML ) to expand the Muara Laboh geothermal power project in West Sumatra, Indonesia.

The ADB is the lead structuring bank on the transaction. Its total arranged finance package of US$92.6 million comprises US$38.8 million from the bank’s ordinary capital resources, a US$38.8 million syndicated ADB B loan from Sumitomo Mitsui Banking Corporation with ADB acting as the lender on record, and a US$15 million concessional loan from the Australian Climate Finance Partnership ( ACFP ).

JBIC will lend US$138 million, co-financed with Mizuho Bank, MUFG Bank, Sumitomo Mitsui Banking Corporation, and The Hyakugo Bank, plus the ADB, bringing the total co-financing amount to US$370 million. NEXI provides cover for the US$139 million loan extended by the commercial banks. The tenor is 19 years.

ACFP is a concessional blended financing facility managed by ADB and funded by the Government of Australia. It seeks to catalyze financing for private sector climate adaptation and mitigation investments in the Pacific and Southeast Asia, and address market gaps and demand by de-risking high development impact projects and bringing them to market.

The borrower is SEML, a special purpose project company whose shareholders are Sumitomo Corporation ( 50% ), Inpex Corporation, the largest oil and gas exploration and production company in Japan ( 30% ), and Jakarta-based private power project developer PT Supreme Energy ( 20% ).

Second unit

In this expansion project, a second unit ( Unit 2 ) will be built on a site adjacent to the existing 85-megawatt unit ( Unit 1 ) which began commercial operation in December 2019. The generating capacity of the project will increase to approximately 170MW. The total project cost is estimated at 70 billion yen ( US$451 million ).

Construction will start in March 2025 and commercial operation in 2027. A power purchase agreement effective until 2052 has been signed with PT PLN, Indonesia's state-owned power company.

Once the new unit goes into commercial operation, the project, combining Units 1 and 2, will supply electricity to about 900,000 households on Sumatra Island. A further expansion of the project will add up to 66MW.

Sumitomo Corporation, in consortium with Indonesian engineering companies PT Inti Karya Persada Tehnik and PT Wasa Mitra Engineering, is the engineering, procurement, and construction ( EPC ) contractor for the entire plant. The main equipment, such as the geothermal steam turbine and generator, will be supplied by Fuji Electric.

The expansion of the project is being promoted with the support of the governments of Japan and Indonesia under the Asian Zero Emissions Community initiative.

Ambitious targets

Geothermal power is an attractive baseload renewable energy source since it is not dependent on wind or sun. Indonesia has many active volcanoes, and is the world's second largest geothermal country with approximately 28,000MW of potential geothermal resources.

The Indonesian government has set a goal of increasing the country’s geothermal power generation capacity from the current 2,400MW to 5,800MW by 2030.

Under its Long-Term Strategy for Low-Carbon and Climate Resilience 2050, published in 2021, the government aims to install geothermal power of up to 23 gigawatts by 2050 to achieve carbon neutrality by 2060.

"Investment in geothermal power can be challenging, making the support of ACFP and the Government of Australia vital to mitigate risks and deliver a project that helps Indonesia to meet its clean energy targets and deliver affordable electricity,” says ADB country director for Indonesia Jiro Tominaga.

“This project will help to reduce greenhouse gas emissions and promote sustainable energy solutions that will enhance the country's long-term energy security. It is critical for the private and public sectors to work together in advancing geothermal development.”