The Korea Trade Insurance Corporation (K-Sure) has agreed to cover a US$711mn term loan facility backing the development of an electric vehicle (EV) battery manufacturing plant in Indonesia.

K-Sure is covering 95% of the total financing for commercial and political risks, with its involvement, on an untied basis, supporting the overseas business of two Korean companies.

ANZ is acting as export credit agency (ECA) coordinator, bookrunner, mandated lead arranger (MLA) and agent on the 10-year agreement, while DBS, HSBC, JP Morgan and Santander are also MLAs.

Hyundai is developing the plant through a joint venture with LG Energy Solution, a major manufacturer of lithium-ion batteries. The first phase of the US$1.1bn project, which is being built in an industrial complex in Karawang, West Java, is slated to begin production in 2024.

ANZ’s global head of project and export finance, Aaron Ross, says the deal marks the first time K-Sure has supported an EV battery deal.

“We are seeing a significant growth in the EV battery sector as automotive companies look to support the global transition to net zero. There is particular interest in Indonesia as a hub, given it is home to the world’s largest nickel reserve,” he adds.

A May report from the International Energy Agency (IEA) notes that there are five key minerals needed for the production of EV batteries, namely lithium, nickel, cobalt, graphite and manganese.

While Indonesia produces about 40% of the world’s nickel, the IEA says that “little of this” is currently used in the EV battery supply chain, given it largely produces lower-grade nickel than countries such as Russia.

Nonetheless, the Indonesia government has set in motion plans to capitalise on the country’s natural resources, and in turn, make the Southeast Asian nation a key link in EV supply chains.

As reported by Bloomberg in August, the Indonesian state has been pushing US-headquartered car company Tesla to manufacture electric cars, as well as batteries, in the country.

Japanese companies including Toyota Motor Corp and Mitsubishi Motors Corp have likewise invested, or announced plans to invest, billions of dollars into Indonesia’s EV manufacturing industry.

Demand for critical minerals is set to soar as the energy transition gathers pace, with electric cars needing six times the amount of metals and minerals than their conventional counterparts.