PLN Pockets $600 Million Financing From ADB

(Photo: PLN Doc)

JAKARTA - PT PLN (Persero) received a loan guarantee of US$600 million from the Ministry of Finance in collaboration with PT Penjaminan Infrastruktur Indonesia (PII) for an electricity strengthening project in Java.

This financing is one of ADB's major programs with the title Sustainable and Reliable Energy Access Program (SREAP) with the main objective of supporting electricity reliability with the principle of sustainability.

The loan guarantee was marked by the signing of the Guarantee Agreement between the Ministry of Finance and ADB and the Guarantee Implementation Agreement (PPP) between PLN and PII on Thursday 19 May at the auditorium of the Directorate General of Financing and Risk Management (DJPPR) of the Ministry of Finance.

Through the funding from ADB, PLN will use it for three main focuses.

First, strengthening the transmission network in West Java and Central Java and modernizing electricity infrastructure. Second, increasing the use of clean energy, such as solar PV and potential EBT projects. Third, to improve the quality of the company's financial management.

The Director General of Financing and Risk Management at the Ministry of Finance, Luky Alfirman, assessed that this signing was a concrete manifestation of responding to the challenge of climate change, which has become a major global issue.

With the guarantee, the energy transition being carried out by PLN can run smoothly.

"This loan, which is direct in nature with government guarantees, will be compared with the Result Based Lending (RBL) model. This is a breakthrough, because this scheme will be much more effective and efficient," said Luky in his statement, Friday, May 20.

Luky added, this Guarantee Agreement is the Government's commitment through the Ministry of Finance and PII, in an effort to support the acceleration of electricity infrastructure development.

"This is a form of government support to reduce the cost of funds for SOEs in order to maintain corporate sustainability. In addition, PII's role as co-guarantor of government guarantees is useful as a ring fencing for the State Budget and assists the government in managing state financial risks, "explained Luke.

On the other hand, the Deputy for Finance and Risk Management of the Ministry of SOEs, Nawal Nely stated that to answer the challenges of the energy transition and the provision of reliable electricity infrastructure, there needs to be a strong commitment and collaboration between PLN and the government and related stakeholders.

This loan guarantee is a form of good collaboration between stakeholders to achieve these targets.

PLN President Director Darmawan Prasodjo emphasized that this agreement is proof that PLN is not fighting alone to deal with climate change.

"With the guarantee agreement from the government, the available investment funds have low interest rates, low costs, and risks can be managed properly. What does that mean? We are able to turn a challenge into an opportunity by collaborating in a spirit of togetherness," he said.

According to him, the full support of the Indonesian government can have a positive impact on PLN.

With this loan agreement in the PLN loan portfolio, it can increase the portion of the direct lending loan scheme portfolio with Government Guarantees of about 20 percent of the total outstanding PLN loans.

"From now until 2030, we need around 35 billion US dollars for capex or capital expenditures in order to build 51.6 percent of power plants that come from NRE," explained Darmawan.

According to him, currently PLN's generating capacity reaches 250 terawatthours (tWh), and by 2060 it is projected to reach 1,800 tWh, most of which comes from renewable energy.

Although the operation of NRE plants will be cheaper, it will still require a capex of 350-400 billion US dollars until 2060.

PLN cooperates with PII to ensure that funding is right on target and is able to accelerate the acceleration of reliable and clean electricity access.

"In addition, this financing can support PLN's program to contribute to the company's Sustainable Development Goals (SDGs) achievements," he added.

As economic growth has begun to squirm with the shift from the Covid-19 pandemic to being endemic, electricity growth needs to be mitigated with a reliable and clean electricity supply.

PLN has projected electricity sales in 2030 based on the latest RUPTL of 265,051 (GWh) with a total of 64.54 million customers only in Java, Madura and Bali. Where there is an estimated addition of 13.47 million new subscribers in 2030.

On the other hand, PII President Director Muhammad Wahid Sutopo said that this agreement is a form of support that has been carried out by PT PLN in implementing green energy-based infrastructure projects.

"Through this loan guarantee, PT PII and the Ministry of Finance are committed to accelerating the development of infrastructure projects that can optimize access expansion and strengthen the reliability of electricity transmission and distribution network services in order to support the strengthening of the community's economy," he said.

ADB Country Director Indonesian Resident Mission, Jiro Tominaga is optimistic that this program will support Indonesia's efforts to face the energy transition and reduce carbon emissions.

"We hope that this program can support PLN's technology and infrastructure in serving electricity in Indonesia," he said.