A US$592mn Sinosure-backed transaction for Indonesia's state-owned electricity provider PLN has been signed in Beijing on May 27. The deal was structured as a buyer's credit facility backed by the Chinese export credit agency. Sinosure is covering 95% of the financing, as is typical for the agency. The financing is supporting a scheme set up by the Indonesian government to build an extra 10,000MW of electricity capacity by 2010 to meet growing demand as the country’s economy grows.
The export deal was arranged by a Bank of China-led consortium of 18 international and Chinese banks. It is supporting the development of a new 3x330MW coal fired steam power plant in Indramayu in western Java. The deal carries a tenor of 13 years, which includes up to three years grace period. HSBC is the financial advisor on the transaction.
Joining Bank of China in the mandated lead arranger group are BNP Paribas; China Construction Bank; China Development Bank; ICBC; Société Générale and China CITC. A total of nine banks joined the senior lead arranger group: ANZ Bank, Bayerische Landesbank, Calyon, Credit Suisse, Fortis, ING, Natixis, RBS and WestLB. Mizuho and SMBC both joined as lead arrangers.
During syndication the facility was oversubscribed, however the borrower opted to just take up the required US$592mn. A banker at HSBC tells GTR the deal was a great achievement given current market conditions.
"Not only was syndication oversubscribed, the fact that we managed to coordinate 18 banks and keep the syndicate in tact until closing also marks the deal out as a success. There is always the risk of banks pulling out of syndicates in today's markets, but in this deal we managed to keep the consortium together."
This financing is funding 85% of the US dollar costs of the power plant project. The remaining costs are being funded in local currency financing arranged by Indonesian banks. This facility was closed in April at Rp1.2tn (approximately US$140mn).
The Indramayu plant is just one of a series of coal-fired power plants being built under a government scheme known as the fast track programme. Under the scheme, the Indonesian government intends to build 10 new coal-fired plants by 2010 in the Java region of Indonesia, and a further 25 to 30 plants outside Java.
To date nine out of 10 of the Java power project contracts have been signed. The first five were signed in March 2007, with the sixth and eighth signed in August 2007. The ninth was signed in recent months, and ten non-Java contracts have also been signed so far.
HSBC has been mandated as financial advisor for eight of the power plants in Java, assisting PLN in co-ordinating the various financings required for each plant. In total HSBC is helping PLN raise US$4bn-equivalent for its fast track programme, of which it has raised approximately US$1.8bn to date.
In January, two US dollar financings were raised for a 1 x625MW power plant in Suralaya and 1 x 660MW power plant in Paiton, both in Java. The two loans, worth US$284.3mn and US$330.8mn respectively, are funding 85% of the US dollar costs of the project. China Export-Import Bank is the sole lender on these loans, providing long-term 15-year door-to-door facilities against a full guarantee provided by the Indonesian ministry of finance.
Following this deal, in April five local currency credit facilities were signed between PLN and a range of Indonesian banks, amounting to Rp5.7tn (US$627mn) to support the Suralaya and Paiton plants, as well as the projects in Indramayu, Labuan, and Rembang. After the closing of these local currency financings, the Suralaya and Paton projects were fully funded, and with the latest US$592mn deal, Indramayu is now fully funded as well.
Discussions about the remaining US dollar and rupiah financing requirements for the fast track programme power plants are said to be progressing well, with banks expected to form themselves into various syndicates over the coming months.
All the recent power plant financings reflect both the growing importance of Chinese-Indonesian trade, as well as the increasing confidence both Chinese and local banks have in the domestic Indonesian economy and its rapidly developing electricity sector.
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