Japan Bank for International Cooperation (JBIC) has agreed to cofinance a loan amounting to Y144.4bn for PT Central Java Power (CJP), an Indonesian company in which Sumitomo Corp has an equity stake, to construct a power plant project. JBIC is financing the project with commercial banks (agent bank: Sumitomo Mitsui Banking Corporation) and it is covering Y86.7bn, or 60% of the total amount.
CJP has undertaken the construction of a coal-fired power plant with a total capacity of 1,320MW (two 660MW generators) in the Tanjung Jati district of central Java. The plant facilities are under a 20-year lease to PT Perusahaan Listrik Negara (PLN), a state-owned power utility. The loan provides funds for the export and delivery of power generating equipment, including boilers and steam turbines, to CJP by Sumitomo Corp.
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In particular, given such a large-scale undertaking, the overcoming the problems hindering this project has been the focus of attention as it is indicative of the recovery from the currency crisis. It is expected that the resumption of the project with this loan will lead to renewed confidence in Indonesia by the financial market. Power demand is growing sharply in Indonesia, with 6-8% annual growth projected in the future in the Java-Bali power grid, which includes the nation’s capital of Jakarta. This prospect has given rise to concern that a serious power shortage would occur. Thus there are high expectations that this project will avert the impending power crisis.
Therefore, JBIC is supporting this project to secure a stable supply of power in Indonesia and thereby help business activities of many Japanese affiliates operating locally. At the same time, the loan will promote exports of a Japanese firm.
As JBIC’s support for Indonesia’s power sector, this loan follows an arrangement which resulted in the settlement of the restructuring plan of the Paiton I IPP power plant project in February this year and two ODA loans, whose loan agreements were signed in July, for the Muara Karang Gas Power Plant Project and the Muara Tawar Gas-Fired Power Plant Extension Project. Apart from these loans, JBIC is also conducting consultations with the Indonesian government, PLN and other concerned institutions in an effort to promote progress in power sector reform.