MIGA Supports Affordable, Clean Power in Indonesia
Hydro project will reduce reliance on expensive fuel oil
Washington, September 3, 2014 – The Multilateral Investment Guarantee Agency (MIGA), the political risk insurance and credit enhancement arm of the World Bank Group, announced today that it is supporting the development and operation of a 47-megawatt run-of-the-river hydropower plant and the construction of a transmission line in Indonesia. The new facility will help reduce the country’s reliance on expensive fuel oil by providing a more affordable and cleaner supply of power to PT Perusahaan Listrik Negara (PLN), Indonesia’s state-owned electric utility company.
MIGA is providing guarantees of up to $200 million to the project’s lenders—the Japan Bank for International Cooperation (JBIC) and Mizuho Bank Ltd. MIGA’s coverage is against the risks of transfer restriction, expropriation, war and civil disturbance, and breach of contract. The project is near the center of Cianjur, West Java in the upper reaches of the Citarum River. It will use the difference in height between the Saguling and the Cirata hydroelectric power plants to generate electricity.
“Indonesia has huge economic potential. However, the country’s power deficit is a major factor holding back broader and deeper economic growth,” says Keiko Honda, MIGA’s Executive Vice President and CEO. “We are pleased to play an essential role in facilitating financing for this project, which will have an important demonstration effect in attracting more private investment in the power sector.”
Indonesia has historically been heavily reliant on fuel oil for electricity generation, which has contributed significantly to the financial difficulties of Indonesia's power sector.
“Supporting private sector investment in the power sector, particularly in renewable energy, is an important goal of the World Bank Group’s Country Partnership Strategy for Indonesia,” says Rodrigo Chaves, World Bank Country Director for Indonesia. “Limited infrastructure development has not only hindered Indonesia’s economic growth, but also negatively affects efforts to enhance equity and reduce poverty.”
“MIGA guarantees were essential for our decision to proceed with financing this important infrastructure project,” says JBIC. “In this transaction, the guarantee extended by MIGA is helping us enhance the overall security of the loan.”
“Indonesia represents an important market for Mizuho and we are committed to the development of sustainable infrastructure as a backbone for growth,” says Mr. Fumio Inagawa, General Manager of Global Project Finance Division.“We welcome MIGA’s participation as a partner in Rajamandala.”
MULTILATERAL INVESTMENT GUARANTEE AGENCY
A Member of the World Bank Group
1818 H Street, NW, Washington, DC 20433
Mallory Saleson, MIGA
Tel: +1 202 473-0844
Rebecca Post, MIGA
Tel: +1 202-473-1964
Cara Santos Pianesi, MIGA