Regarding Banking Required To Finance Downstreaming, Bahlil: Why Cost A 10-year-old Consumption Project

Minister of Energy and Mineral Resources Bahlil Lahadalia (Photo: Doc. VOI)

JAKARTA - Minister of Energy and Mineral Resources (ESDM) Bahlil Lahadalia opened his voice regarding the government which requires non-bank banking institutions and financial institutions to finance downstream programs.

He considered this necessary so that banks would not only finance consumptive projects that have break-even points (BEP) or return on capital in the 10th year.

"Why do banks finance 9 years of consumption projects, 10 years of break-even points, if the downstream is 6 years of BEP," said Bahlil after chairing the inaugural meeting of the downstream task force at the Ministry of Energy and Mineral Resources Office, Friday, January 17.

For this reason, Bahlil asked banks to shift their financing to downstream projects that have a faster turning point. He acknowledged that projects that were already running were also important, but banks needed to diversify financing.

"Why give standby loan credit to the company that has been around for so long. Companies have been important for a long time, but it is also important to diversify," continued Bahlil.

Previously, Bahlil had indeed asked banks to liken a downstream project. Moreover, he was appointed by President Prabowo Subianto to become the head of the downstream task force.

"Our banking, non-bank financial institutions, must be willing to take part in financing downstream investment projects," Bahlil told the media crew at the ESDM Ministry Building, Friday, January 10.

Bahlil said that the banking and financial institutions in question are not only limited to state-owned banks or Himbara, but all banks including foreign banks operating in Indonesia.

"Everything. As long as he wants to operate in Republic of Indonesia, he follows the rules of the game in the Republic of Indonesia," continued Bahlil.

When asked about the low interest proposal for the downstream project, Bahlil said that actually the downstream project financing has a good level of investment efficiency, aka the internal rate of return (IRR).

"The average is above 11-12 percent. If 11-12 percent of IRR I don't think there needs to be interest intervention, how good is this," he said.