A coal-fired plant in Indonesia has attracted debt finance of US$3.355bn, from a group of predominantly Japanese lenders.

The Japan Bank for International Co-operation (JBIC, Japan’s export credit agency) lent US$1.678bn from its own book. Approximately the same amount comes from a consortium of commercial banks: BTMU, Mizuho Bank, Norinchukin Bank, SMBC, and UOB of Singapore – the only non-Japanese lender in the syndicate.

The commercial tranche is guaranteed by Japan’s government-owned insurance firm Nexi, with the finance going to PT Bhumi Jati Power (BJP), an Indonesian company in which the Japanese conglomerates Sumitomo and Kansai Electric Power Company hold stakes.

The project in question is the Tanjung Jati B coal-fired plant, which will generate 2,000MW of power through two separate units. The off-take agreement has been signed with PLN – the Indonesian state-owned utility, for a period of 25 years.

The Indonesian government has committed to constructing power plants with a combined capacity of 35,000MW in the five years from 2015. The country is plagued by power issues, which are a huge impediment to trade and manufacturing.

Being a large producer of coal, it is perhaps natural that the company has such a high dependency on thermal energy: 51% of Indonesia’s power is generated by coal-fired plants. This level needs to be reduced dramatically if the country is to reach Paris Agreement targets on carbon emissions.

Power is just one part of Indonesia’s infrastructure plans: the Asian Development Bank (ADB) estimates that in the 13 years to 2030, the country needs to be investing 6% of its GDP in projects in order to have the underlying infrastructure to support trade and investment. The development bank recommends that 0.5% of the 6% should go towards climate-friendly initiatives.

In 2016, the Indonesian government pledged to spend US$7.4bn on infrastructure projects – less than anticipated – and there is frustration at the administration’s inability to get projects off the ground. Jokowi, the Indonesian president, was elected on a ticket that promoted the construction of ports, roads and railways in a country that is plagued with logistical problems and chronic congestion.