This summary covers investments by Eramet of France and Mitsubishi Corporation of Japan in the PT Weda Bay Nickel project in Indonesia. The investors have applied for a MIGA guarantee of $207 million for a period of up to three years against the risks of expropriation, breach of contract, and war and civil disturbance.

During this period it is anticipated that approximately $230 million will be invested for the engineering and feasibility studies necessary to conclude a bankable feasibility study for the operation of a nickel- cobalt mine with a hydrometallurgical processing plant on Halmahera Island. Once the studies are complete, an investment decision will be taken by the board of Eramet on whether to continue developing the mine and building a processing plant. It is anticipated that the final investment decision should be made before the end of 2012.  

The core project will require large capital expenditure of several billion dollars to develop the mine and the processing plant. In addition, in order for the mine to be commercially feasible, additional capital expenditure will have to be undertaken on the associated transportation infrastructure including roads, airport, and port.

Environmental Categorization

The project is a Category A under MIGA’s environmental and social review procedures.

Click here to view the Environmental and Social Review Summary and here to view the Environmental and Social Impact Assessment.

Development Impact

The Weda Bay deposit is one of the largest undeveloped nickel projects with 5.1 million tons of nickel contained in measured, indicated, and inferred ore resources.  Should this project be developed it will allow Indonesia to become one of the world’s major nickel producers. It will provide significant employment, both during construction and when in operation, major government revenues, and will have a major impact on the local economy, in particular for the remote and rather underdeveloped North Maluku Province. It will provide an important demonstration of how a major natural resource can be developed in Indonesia in a socially and environmentally sustainable way, and of benefit to the Indonesian people.

MIGA’s support for this investment is aligned with the World Bank Group’s country partnership strategy for Indonesia for 2009-2012, particularly with regard to making Indonesia’s private sector a driver in broad-based growth, and increasing the country’s competitiveness regionally and globally.

For additional information on this proposed project, please click here.

In FY06, MIGA issued another $0.89 million in guarantees to MTU Asia, covering its additional capital investment of $1 million into PT MDDI. The new capital will be used to expand MDDI's operations by establishing a workshop for selling spare parts and for providing service and maintenance of diesel engines in Balikpapan, Kalimantan East, Indonesia. The expansion is in response to customer demand for a service workshop in Balikpapan.

This expansion is expected to create 35 new jobs, 34 of which will be local hires and one of which will be a technical expatriate who will oversee day-to-day operations. Technical training will be provided for technicians in either the Jakarta or Singapore workshops. In addition to creating employment in Balikpapan, PT MDDI will provide health insurance to all employees and their immediate family members. The project is also expected to generate approximately $50,000 a year in tax revenues for the government of Indonesia.

The project was underwritten using MIGA's streamlined procedures for small and medium-size investors under its new Small Investment Program.

--Contract cancelled--

MIGA has provided guarantees to MTU Asia Pte. Ltd. (MTU Asia) of Singapore of $540,000 and $1,860,000 to cover its $0.6 million equity investment in, and $1.8 million shareholder loan to, PT MTU Detroit Diesel Indonesia (MDDI), in Indonesia. The guarantees are for a period of up to five years against the risks of Expropriation and War and Civil Disturbance.

The project involves the establishment of a distributorship in Jakarta for the distribution, sale, and maintenance of MTU diesel engines and spare parts for use in construction, power generation, and other industries including the commercial marine sector. The project will meet an increasing demand for diesel engines and improve the levels of customer satisfaction by providing extensive after sales service. In addition, the supply of high-technology, high-performance, electronically controlled diesel engines will improve the quality and efficiency of facilities to which they are installed and improve the quality of life for Indonesian residential and business users by supplying well maintained engines that reduce environmental and noise pollution.

The project will employ about 50 local people and provide a special training program for qualified service technicians. The project is also expected to generate approximately $490,000 in tax revenues for the Government of Indonesia during the first 5 years of operation. The MDDI project meets two of MIGA's priority concerns: it is a South-South investment and provides support for SMEs. Furthermore, the ECICS Credit Insurance Ltd. of Singapore, with whom MIGA shares a Memorandum of Understanding (signed in November 1998), played an instrumental role in MIGA's involvement in the project.

MIGA issued a $60 million guarantee contract to Enron Corporation of the United States for its equity investment in a 500-megawatt gas-fired, combined cycle power plant near Surabaya, Indonesia. MIGA's guarantee covers the risks of expropriation, transfer restriction, and war and civil disturbance. The guarantee is issued under the Underwriting Program, and MIGA's exposure is $15 million.

The project enterprise, P.T. East Java Power Corporation, will improve the availability and reliability of electric power in Indonesia and account for 3 to 5 percent of the country's total electricity production. Indonesia will benefit from the project's utilization of local natural gas rather than oil, which will continue to be exported to earn foreign exchange.

The project will create about 800 jobs during the construction phase and 45 permanent jobs. An additional 90 people will be hired by contractors for maintenance and other services. Employees will receive substantial technical and managerial training, including training in power plant operation and maintenance and gas turbine and combined cycle technology. The local community will benefit from the installation of electricity transmission lines, the building of a new road, and the improvement of an existing road with drainage and lighting. Domestic businesses also will benefit from the local sourcing of goods and services.

MIGA issued guarantees totaling $14 million to US WEST International Holdings, Inc. and The Chase Manhattan Bank of the States (acting on behalf of a group of lenders) for their equity and loan investments, respectively, in the expansion and of a telephone network in Indonesia. MIGA guarantees provide protection against the risks of transfer restriction, expropriation, and war and civil disturbance.

The project enterprise, P.T. ARIAWEST International, will operate in the western section of Java Island, where a telephone company employing 2,900 people and operating 420,000 lines has been acquired for expansion. An additional 500,000 lines will be added to the service area to provide dependable, state-of-the art telecommunications services to government, residential, and business customers in West Java. Local vendors will benefit from the opportunity to supply equipment and services to the project. Employees will receive training locally and in Japan and the United States. The project will generate $100 million in tax revenues over its lifetime.

MIGA issued a $50 million guarantee to Capital Indonesia Power I C.V., an affiliate of General Electric Capital Corporation of the United States (GE), for its $61.2 million equity investment in the construction and operation of two 615-megawatt coal-fired electricity-generating plants in Indonesia. MIGA's guarantee covers the risks of currency transfer and war and civil disturbance.

The plants will be located at the Paiton Power Generating Complex, and the power output will be sold to the government-owned electricity corporation. The project will create more than 260 permanent jobs. In addition, approximately 2,500 people will be employed during the construction phase, and GE will create housing for up to 550 employees and their families. All employees will receive substantial technical and managerial training. Existing roads will be improved and telephone service upgraded. The long-term employment benefits created by the construction and operation of the plants will enhance the quality of life for the project's workers, their families, and the local business community.

By increasing the availability of electricity, the project will have a significant positive impact on Indonesia's economy. Frequent power shortages inhibit the country's economic development. Moreover, only about one-third of its households are connected to the electricity grid. Indonesia will also benefit from the project's utilization of nonexportable coal reserves, which will further develop the coal industry and allow the country to maintain its oil export levels.

MIGA issued a $1.46 million guarantee to Komatsu Ltd,, a Japanese company, to cover its equity investment in P.T. Hokuriku United Forging Industry, an Indonesian joint venture. The company will manufacture and export forged machinery parts for construction equipment and commercial vehicles. Through an extensive training program for its forty-six Indonesian employees, the project will transfer modem forging technology and quality standards. The project will have a $3.7 million annual net positive effect on the balance of payments and generate annual tax revenues of over $300,000. MIGA will provide war and civil disturbance coverage for 90 percent of Komatsu's investment for fifteen years.

MIGA's $50 million guarantee provides security for this U.S. company's $500 million expansion of a copper, gold and silver mining project in Irian Jaya, Indonesia. Freeport McMoran's expansion of its existing and successful mining operation will enable it to contribute to the domestic economy through increased earnings, employment and local procurement. The guarantee covers loss arising from breach of contract and war risks for a period of 14 years.