[Indonesia] Jawa 1 Gas-to-Power IPP Project

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escveritas
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[Indonesia] Jawa 1 Gas-to-Power IPP Project

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Jawa-1 Liquefied Natural Gas-to-Power Project entails the construction, operation, and maintenance of a 1,760-megawatt (MW) load-following, combined-cycle, gas turbine (CCGT) power plant and associated facilities. The LNG-to-power project is located about 100 kilometers (km) east of Jakarta on the Javanese coastline. The project will be developed and implemented by an independent power producer, PT. Jawa Power Satu, under a 25-year power purchase agreement (PPA) with the Indonesian utility company PLN.

The project will help the government addressing an expected electricity supply shortage that could undermine the country''s sustainable growth potential if not addressed adequately.

The use of combined-cycle gas-fired generation can improve the environmental sustainability of the current energy mix by displacing diesel and coal as fuels for electricity generation. Gas turbines can ramp up more quickly than coal or diesel units, and thus are better suited to respond rapidly to load fluctuations. In turn, this can enable greater use of intermittent renewable energy sources, such as wind and solar. Therefore, the increase in the use of natural gas will help the government reach the target of 23% for power generation from renewable energy sources.

In addition, the Jawa-1 LNG-to-power project will also help lower the average power generation cost in Indonesia''s largest power grid, given that the proposed project's tariff is well below the average cost of generation for the Jawa -Bali grid.
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Re: [Indonesia] Jawa 1 Gas-to-Power IPP Project

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ADB Finances Largest Combined-Cycle Power Plant in Indonesia

JAKARTA, INDONESIA (29 April 2019) — The Asian Development Bank (ADB) announced the first drawdown of funds under a private sector financing package totaling more than $305 million invested in Jawa-1, Indonesia’s largest combined-cycle gas turbine (CCGT) power plant.

“ADB is a partner of choice in Indonesia’s strategy to finance low-carbon power generation through private sector participation,” said Mr. Michael Barrow, Director General for ADB's Private Sector Operations Department. “This project will support the country’s efforts to strengthen the liquefied natural gas (LNG) supply chain and increase energy security, while helping to reduce power generation costs.”

The project comprises a 1,760-megawatt CCGT power plant and ancillary infrastructure in Cilamaya, Karawang, West Java. ADB’s financing package includes a direct loan of $185 million, and a parallel loan of $120 million provided by the Leading Asia’s Private Infrastructure Fund (LEAP), which is administered by ADB.

Jawa-1 will be one of the first and largest projects in Indonesia using LNG, demonstrating the Government of Indonesia’s commitment to reduce dependency on coal and diesel fuel in favor of cleaner domestic energy sources such as natural gas. The CCGT power plant will supply energy to PT. Perusahaan Listrik Negara (PLN), Indonesia's national power utility. The project is expected to help Indonesia avoid 1.77 million tons of carbon dioxide emissions.

The project was recently awarded 2018 Asia Pacific Gas-Fired Power Deal of the Year by Infrastructure Journal and Project Finance Magazine (IJGlobal), and 2018 Asia Pacific Power Deal of the Year by Thomson Reuters Project Finance International (PFI).

ADB’s support for Indonesia’s natural gas value chain dates back to a 2005 loan of $350 million for the greenfield development of Tangguh natural gas liquefaction facility, which was followed by a $400 million loan for the plant’s expansion in 2016. The Tangguh natural gas liquefaction facility is a likely source of LNG for Jawa-1.

Jawa-1 is expected to power 11 million Indonesian households from 2021, supporting the country’s 100% electrification target by 2024. The project will create about 4,800 jobs during construction and 125 jobs when the plant is operational. It will also offer opportunities to improve women’s livelihoods through targets for women’s employment and training on livelihood and skills development to be monitored by ADB.

LEAP is one of ADB’s cofinancing vehicles dedicated to private sector infrastructure in Asia and the Pacific. Japan International Cooperation Agency (JICA) supports the fund, launched in August 2016, through a $1.5 billion equity commitment. Combined with ADB’s own capital and that of commercial partners, the fund is expected to provide financing of at least $6 billion and enables ADB to boost support for quality and sustainable infrastructure.

ADB estimates that Indonesia needs infrastructure investment of $1.1 trillion for 2016–2030, and $1.3 trillion over that period if climate adaptation measures are included. Accelerating investment in affordable and sustainable energy is critical to achieve the country’s economic and social development goals.

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. In 2018, it made commitments of new loans and grants amounting to $21.6 billion. Established in 1966, it is owned by 68 members—49 from the region.
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Re: [Indonesia] Jawa 1 Gas-to-Power IPP Project

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Project Financing for Jawa 1 Gas-to-Power Project in Indonesia
First Project Financing to Support Japanese Companies Participating in Gas-to-Power Project in Asia: Flagship Project of the newly launched QI-ESG

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The Japan Bank for International Cooperation (JBIC; Governor: Tadashi Maeda) signed on October 18 a loan agreement for project finance*1 amounting up to approximately USD604 million (JBIC portion) with PT Jawa Satu Power (JSP) and PT Jawa Satu Regas (JSR) for the Jawa 1 Gas-to-Power Project in Indonesia. The project financing is provided as part of JBIC's newly launched Global Facility to Promote Quality Infrastructure Investment for Environmental Preservation and Sustainable Growth (QI-ESG*2). Both JSP and JSR are Indonesian companies: the former invested in by Marubeni Corporation, Sojitz Corporation and PT. Pertamina (Persero), the state energy company of Indonesia; the latter by Marubeni Corporation, Sojitz Corporation, Mitsui O.S.K. Lines, Ltd., PT. Pertamina (Persero), and so on. The loan is co-financed by Mizuho Bank, Ltd., MUFG Bank, Ltd., and other banks. The total co-financing amount is approximately USD1,312 million, the portion co-financed by private-sector banks is covered by Nippon Export and Investment Insurance (NEXI).

In this Gas-to-Power Project, electric generation and gas-related facilities will be developed in an integrated manner in West Java, Indonesia. JSP will construct, own and operate a 1,760 MW gas-fired combined cycle power plant while JSR will construct, own and operate an offshore floating LNG storage and regasification unit (FSRU) to supply fuel to the power plant. The electricity produced by these facilities will be sold to PT PLN (Persero), a state-owned power utility in Indonesia, for a period of 25 years.

In its "Export Strategy for Infrastructure System" revised in June 2018, the Japanese government expressed its intention to promote expanding orders for infrastructure systems, including the design, construction, operation and management of infrastructure, as well as increasing investments in local businesses. The government also announced its "overseas deployment strategy for the power sector" in October 2017, emphasizing overseas power generation business implemented by Japanese trading companies as a priority area in its policy. This overseas strategy states that the government will provide support for overseas power development projects through JBIC's financial instruments. This loan, therefore, is in line with these policies of the government as it will contribute to Japanese industry maintaining and enhancing its international competitiveness by financially supporting those Japanese companies that invest in overseas infrastructure projects as well as operate and manage these facilities on a long-term basis.

At the 36th meeting of the Management Council for Infrastructure Strategy held on April 10, 2018, the Gas-to-Power Project, to which this loan is extended, was identified as one of the overseas initiatives that Japan should pursue. In addition, the Japanese government expressed its intent to support the expansion of LNG use in Asia. This Project, in which Japanese companies will be involved in LNG storage and regasification, is in line with the government's policy. In particular, its significance lies in the fact that this is the first project financing provided for gas-to-power projects to be implemented in Asia as well as the first time for JBIC to finance such a project.

JBIC launched QI-ESG on July 1, 2018. This facility is aimed to provide a wide range of financing support for infrastructure development which is expected to help to preserve the global environment. In addition, this will be the flagship project of QI-ESG as well as the first project in Asia under QI-ESG*3 for the purpose of preserving the global environment.

Also in this Project, gas turbines manufactured by General Electric Company will be installed. This arrangement was specifically noted in the joint statement of the Second Public-Private Sector Roundtable Discussion on U.S. - Japan Cooperation on Third Country Infrastructure, which took place on April 23, 2018.

Against the backdrop of the Indonesia's surging electricity demand, which has increased due to steady economic growth, the Indonesian government is moving forward with a plan to build an additional 56 GW of generation capacity over the next 10 years, including this Project. Furthermore, the government emphasizes gas-fired generation as a middle-load power source for sustainable electricity supply, with the intention of maintaining the proportion of gas power generation to the country's total power output at more than 20%. In view of this situation, this Project is thus considered to be congruent with Indonesia's electricity policy.

As Japan's policy-based financial institution, JBIC will continue to provide financial support to assist Japanese companies in expanding their overseas infrastructure business in collaboration with private-sector banks by drawing on its various financial facilities and schemes for structuring projects as well as by performing its risk-assuming function.

Note
Project finance is a financing scheme in which repayments for a loan are made solely from the cash flows generated by the project.
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Re: [Indonesia] Jawa 1 Gas-to-Power IPP Project

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CCGT Jawa-1 1.760 MW

The IPP Jawa-1 project is a project that integrates Gas facilities with a power plant project consisting of 1.760 MW Combine Cycle Gas Turbine (CCGT), FSRU, gas pipeline between CCGT Jawa-1 and FSRU, and transmission lines that connect the Power Plant with interconnection points.

ABOUT Combine Cycle Gas Turbine (CCGT) JAWA-1

The IPP Jawa-1 project is a project that integrates Gas facilities with a power plant project consisting of 1.760 MW Combine Cycle Gas Turbine (CCGT), FSRU, gas pipeline between CCGT Jawa-1 and FSRU, and transmission lines that connect the Power Plant with interconnection points. The LNG supplied by PLN will be received and regasified in the FSRU unit and then delivered in the form of gas to the CCGT Jawa-1 unit through offshore and onshore gas pipes. Furthermore, the electricity generated by the CCGT Jawa-1 will be distributed to PLN for 25 years with the BOOT scheme (Build, Own, Operate, and Transfer) to the Java-Bali electricity system through a 500 kV transmission network from the power plant to the 500 kV PLN substation. CCGT Jawa-1 will sell electricity to PLN with a PPA (Power Purchase Agreement). LNG supply for the IPP Jawa-1 project is the responsibility of PLN. The LNG comes from the Tangguh LNG refinery based on LNG Sale Purchase Agreement (SPA) between PLN and Tangguh.

The IPP Jawa-1 project is located in the village of Cilamaya, Karawang Regency, West Java on 39 hectares of land owned by PT Pertamina Gas (Pertagas). The location of the power plant is located in the SKG Cilamaya area which is also surrounded by facilities owned by PT Pertamina EP and PT Pertamina Hulu Energi. For the location of the Special Facility in the form of a 500 kV switching station Cibatu Baru II / Sukatani and a new 500 kV Dual circuit transmission network connecting the Electric Interconnection Facility to the Cibatu Baru II / Sukatani switching substation located in Bekasi Regency and Karawang Regency. The FSRU will be moored at the Cilamaya sea hearing a distance of 20 km from the beach. The CCGT Jawa-1 and FSRU are connected with 21 km of gas pipelines, 14 km of offshore gas pipes and 7 km of onshore gas pipes. Electricity produced by the CCGT Jawa-1 is channeled to the PLN substation in Sukatani village, Bekasi district through a 52 km transmission line.

To undertake an integrated IPP Jawa-1 project, two project companies are needed, namely PT Jawa Satu Power (JSP) and PT Jawa Satu Regas (JSR). JSP is responsible for designing, constructing, and operating CCGT Jawa-1, transmission lines, substation and switchyard facilities. While JSR is responsible for the design and construction and operation of FSRU facilities that will receive LNG from the Tangguh refinery. The separation of the two project company entities is carried out considering that the project company for the FSRU is considered a national shipping so it must pay attention to the cabotage principle where the composition of shares of domestic national companies must be greater than 51%. In addition, the business nature of IPP and FSRU is different from licensing and taxation, so two separate project company entities are needed. JSP share ownership is owned by PPI consortium, Marubeni, and Sojitz with 40% PPI shares, 40% Marubeni, and 20% Sojitz. While JSR shares are mostly owned by the PPI consortium, Marubeni, Sojitz and the remainder is owned by PT Humpuss Intermoda Transportasi and Mitsui O.S.K Lines (MOL). Ownership in JSR is 26% PPI, Marubeni 20%, Sojitz 10%, Humpuss 25%, MOL 19%.
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