Mount Raja Paksi Gets A 60 Million US Dollar Investment From The IFC

Photo: Doc. PT Gunung Raja Paksi Tbk (GRP)

JAKARTA - PT Gunung Raja Paksi Tbk (GRP), one of the largest private steel producers in Indonesia and industry leaders in low-carbon steel production in Asia, signed a financing agreement of up to 60 million US dollars with the International Finance Corporation (IFC). This is the first IFC investment in the Asian steel sector in more than a decade.

The partnership between GRP and the IFC, the world's largest development agency focused on the private sector in developing countries, will help GRP increase production of low-quality carbon steel at a 200-hectare plant in West Java. The plant will produce much lower carbon emissions than the global average.

In addition to this loan, the IFC has also signed an Advisory Engagement Letter with the GRP to help develop and implement a decarbonization strategy and support the GRP's efforts to reduce greenhouse gas emissions that are in line with international standards. This support includes exploring various funding options to support the GRP's decision to disable the newly built but never operated Blast Furnace, as well as improving EAF's technological energy efficiency and assessing new downstream process options and technologies.

Global steel demand is expected to increase by 30 percent by 2050, and much of this increase will be met by Asia. Indonesia's own steel production has increased by more than 90 percent since 2019, and is expected to continue to increase this year.

Therefore, IFC investment in GRP comes at the right time, along with Indonesia's ambition to become a global steel producer and achieve net zero emissions by 2060. This investment also helps GRP achieve their target for net zero emissions by 2050.

The steel industry is one of the biggest contributors to the global climate crisis, responsible for 8 percent of the world's greenhouse gas emissions. If not handled, the sector could spend a quarter of the world's carbon budget to keep global warming below 1.5 degrees Celsius by 2050.

GRP has been using low-carbon steel (EAF) production technology since 2016, making it one of the most experienced and advanced low-carbon steel producers in Asia. Although several other manufacturers are now using the EAF, the GRP is the only integrated plant from upstream to downstream in Asia that uses low-carbon steel.

"Through this partnership with the IFC, the GRP will continue to set new standards for decarbonization of steel production in Asia. This important investment recognizes the initial leadership of the GRP as one of Asia's first low-carbon steel producers. The steel industry is very important for the prosperity of Asia and the world, but we must quickly decarbonize to maintain this prosperity for future generations. If steel companies do not adapt to the green transition, their assets can become worthless. Sustainability has always been a guide for the future GRP," said Kimin Tanoto, Chairman of Executive Committee GRP.

USD 60 million investment from the IFC will also help strengthen cases of low-carbon steel businesses around the world, including exploring high-value steel products that are in line with GRP's EAF technology and can be implemented across the global steel industry.

"Our partnership with the GRP is a major step in supporting industrial decarbonization in Indonesia, and it marks IFC's first steel investment in Asia in more than a decade," said Euan Marshall, IFC Country Manager for Indonesia and Timor Leste.

"We are delighted to be able to provide investment and consulting support to help GRPs develop a commercial and environmentally sustainable business."

GRP plans to leverage partnerships with the IFC to increase their competitiveness in exporting low-carbon steel to the European Union, compared to traditional steel producers. In addition, the GRP also wants to explore new opportunities to replace imported steel in Indonesia produced from countries with higher CO2 per tonne emissions compared to low-carbon GRP steel.

Kelvin Fu, GRP's Chief Transformation Officer, added that today's announcement with the IFC is a strong acknowledgment of the GRP's vision of revolutionizing the steel industry, not only in Asia but also in the world.

"Together, we show what might be achieved. I am proud that this partnership strengthens our ability to produce low-carbon steel, explores new market opportunities, especially in Europe, and ensures the position of the GRP as a major player in the future of the Indonesian economy and environment. With advanced technology and strategic alliances, we not only meet global environmental standards, but also exceed them," said Kelvin.