PUBLIC-PRIVATE PARTNERSHIPS BRIEFS

Indonesia: Asahan Hydroelectric
                   Power Plant




Overview
The elevation difference in Northern Sumatra’s Asahan River and Lake Toba
region has been used for its hydroelectric power generation capacity since 1975.
Bajradaya Sentranusa (BDSN), an Indonesia energy company, has set up a 180
megawatt (MW) hydroelectric power plant (HPP), Asahan I, to provide low-cost,
renewable, and dependable power in Indonesia. IFC supported this project
through equity and debt finance.



   This series showcases how the World Bank Group supports the development
   and implementation of public-private partnerships. This support comes in the
   form of public sector loans, private sector finance, sector and transaction advice,
   guarantees, and output-based aid.




                                                      PUBLIC-PRIVATE PARTNERSHIPS - MAY 2016
Background                                                                   loans of $75 million as well as syndicated and parallel
                                                                             loans of $205 million. The parallel loan lender is PT
Indonesia annual energy consumption, currently
                                                                             Indonesia Infrastructure Finance, a private financing
estimated at 1.044 billion barrels of oil equivalent, is
                                                                             institution, and the syndicated-loan lenders are KDB
expected to rise 2.5 times by 2030. Now, 51 percent
                                                                             (Korea Development Bank), Maybank International
of this energy need is met through fuel-based sources
                                                                             Labuan Branch, Natixis Singapore Branch,
and with the growth expected in energy consumption,
                                                                             Societe Generale, and Sumitomo Mitsui Banking
this demand is likely to exert macroeconomic stress
                                                                             Corporation.
on the developing country. Similarly the consumption
of electricity in Indonesia is expected to grow at an                        The investment in BDSN is part of IFC’s strategy of
average of 8.4 percent per year to a total of 386.6                          building long-term partnerships in renewable-energy
TWh by 2022. The Government of Indonesia (GoI) is                            sectors that power development. Asahan I, which is
keen to raise the stakes of new and renewable energy                         powered by the river’s natural flow, has been providing
sources share of the energy mix from 5.7 percent in                          reliable power at a low cost since it started operating
2011 to about 20 percent by 2022.                                            in January 2011 and is now a cornerstone of the
                                                                             country’s regional electricity grid.
Consequently, the development of hydroelectric
capacity is a priority for GoI. State-owned utility PT
Perusahaan Listrik Negara (PLN) has identified 96                            Outcomes
potential hydroelectric power sites in Indonesia, of                         Increased access to consistent power: more than a
which 40 percent will be open to private developers.                         quarter of Indonesia’s growing population is not
However, the development of hydropower in                                    connected to the national grid, leaving about 66
Indonesia is not without obstacles as the archipelago                        million people without access to electricity; the
country has a vast area under protected forest coverage                      Sumatra grid suffers the longest blackouts among
and many disparate islands. An equally significant                           all of the country’s regional grids.
challenge is the lack of qualified local developers who
                                                                             Reduced reliance on fossil fuels: sixty percent of
can invest in this sector.
                                                                             Indonesia’s electricity supply in 2012 came from coal
                                                                             and oil, both of which are polluting fuels that produce
World Bank Group Role                                                        high carbon emissions.
Asahan I is developed by BDSN, an independent                                Reduction in the cost of power generation: estimated
power producer (IPP) whose principal shareholders are                        savings from BDSN’s power generation is up to
Fareast Green Energy Pte. Ltd. and PT Pembangkitan                           $250 million per year based on the marginal cost of
Jawa Bali (PJB), a subsidiary of PLN. Asahan I is                            production in the North Sumatra grid of around 30
a 180 MW run-of-river hydroelectric power plant                              cents per kilowatt hour using diesel fuel.
located in Indonesia’s North Sumatera Province. The
plant has been operational since January 2011 and
sells electricity to PLN in accordance with a long-term
power purchase agreement expiring on December 31,
2040. The contract stipulates an annual “take-or-pay-
energy level” of 1,175 GWh of electricity.
To improve the financial sustainability of BDSN and
the Asahan I HPP, IFC acquired a minority stake in
the company and provided it a $280 million loan
facility. The financing agreements comprise of IFC


Photos:
Front: Klim Levene/Creative Commons - creativecommons.org/licenses/by/2.0/




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