High voltage in Indonesia

In a deal that has furthered the development of the Asia Pacific loan market, a US$592mn Sinosure-backed transaction for Indonesia’s state-owned electricity supplier, PLN, was signed in Beijing in May 2008. This was a deal that brought together 18 multinational banks, all with different strengths and credit cultures, to structure the largest buyer’s credit to ever be supported by the Chinese export credit agency Sinosure in Indonesia.

Arranged by a Bank of China-led consortium of banks, the transaction heralded a strengthening of co-operation between Chinese and international banks. The deal carries a tenor of 13 years, with a three-year period of grace. Along with Bank of China, BNP Paribas, China Construction Bank, China Development Bank, ICBC, Société Générale and China Citic joined the list of mandated lead arrangers. Nine banks joined the senior lead arranger group: ANZ Bank, Bayerische Landesbank, Calyon, Credit Suisse, Fortis, ING, Natixis, RBS and WestLB. Lead arrangers were Mizuho and Sumitomo Mitsui Banking Corporation (SMBC).

Sinosure is covering 95% of the financing, and the Indonesian ministry of finance is providing a full guarantee. This participation not only ensured the successful closing of this sizeable financing, but also allowed PLN to enjoy very competitive terms and conditions.

Michelle Ling, regional head of export finance Asia at Société Générale in Hong Kong comments: “This deal provides a clear example of coming opportunities for ECA financing in the Asian power sector and confirms Sinosure’s key role in supporting Chinese exports for projects in other Asian countries.”

Despite the fact that the facility was heavily oversubscribed, the borrower chose to take only the required US$592mn – 85% of the contract price. The remaining costs are being provided in local currency financing arranged by Indonesian banks.

PLN is Indonesia’s largest electricity company, wholly-owned by the Republic of Indonesia. PLN owns and controls all public electricity infrastructures in the country, including power generation, transmission and distribution facilities.

The financing supports a scheme set up by the Indonesian government to meet a growing demand for power and build an extra 10,000MW of electricity capacity by 2010. More specifically, the deal will back the development of a new 3x330MW coal-fired steam power plant in Indramayu in western Java.

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. As part of the scheme, the Indonesian government plans to build 10 new coal-fired plants by 2010 in the Java region, and 25 to 30 plants outside of Java.

The Fast Track Programme was launched in 2006 in a bid to reduce Indonesia’s reliance on fuel coal and accelerate the development of power generation. The entire programme, including generation and transmission, will require an estimated amount of debt funding of US$10.2bn before 2011.

Deal Information

Borrower: PLN Persero
Amount: US$592mn
Mandated lead arrangers: Bank of China; BNP Paribas; Société Générale CIB; China Construction Bank Corporation; Industrial Commercial Bank of China; China Development Bank; China Citic
Additional lenders: ANZ; Bayerische Landesbank; Calyon; Credit Suisse; Fortis Bank; ING; Natixis; RBS; WestLB; PT Bank Mizuho; Sumitomo Mitsui Banking Corporation (SMBC)
ECA: Sinosure
Law firms: Norton Rose; Clifford Chance
Tenor: 13 years
Date signed: May 2008