On August 7, 2014, MIGA issued guarantees of up to $200 million covering non-shareholder loans by Mizuho Bank Ltd. and Japan Bank for International Cooperation of Japan to the Rajamandala Hydropower Project in Indonesia. The coverage is for a period of up to 19 years against the risks of transfer restriction, expropriation, war and civil disturbance, and breach of contract.
The project consists of the development and operation of a 47 megawatt run-of-the-river hydropower plant near Bandung on Java Island on a build-operate-transfer basis. The plant is expected to generate approximately 181 kilowatt hours per year that will be sold under a 30-year power purchase agreement with PT Perusahaan Listrik Negara (PLN), a state-owned enterprise.
Despite a ramp-up in power capacity since the 1980s, the national electrification rate in Indonesia remains at 71 percent—leaving around 70 million people without access to grid electricity and forcing them to resort to costly and unreliable forms of power. In addition, the country’s projected GDP growth of 7 percent will further increase the electricity demand.
Moreover, Indonesia currently relies excessively on expensive oil fired generation and needs to switch to cheaper fuel sources. The proposed project will help lower the current average cost of power produced in the country.
The power project is aligned with the World Bank Group’s Country Partnership Strategy for Indonesia, which stresses the importance of building energy capacity to sustain economic progress.
MIGA’s support for this investment is also aligned with the Agency’s priority of supporting investments into complex infrastructure projects.