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$9.1 million German grant for geothermal project in Aceh cancelled

Fields in Aceh, Indonesia (source: flickr/ Vanina W., creative commons)
Alexander Richter 18 Aug 2017

The partners to Seulawah geothermal project in the province of Aceh in Indonesia, announce the cancellation of a $9.1 million grant by German development bank KfW.

Reported last week from Indonesia, a grant from German development bank KfW Germany of EUR7.72 million ($9.1 million or Rp 108 billion) for the Seulawah geothermal was recently cancelled.

It seems that certain conditions attached to the grant, was seen as too burdensome by the Indonesian partners to the project.

Following the signing of a partnership agreement between Pertamina Geothermal Energy and the Regional Development Company of Aceh (PDPA) at the end of July, the Governor of Aceh Irwandi Yusuf said, that “the grant should be unconditional.”.

The President Director of PDPA Muhsin said, to cover the operational financing of the project, PDPA asked Pertamina’s policy to assist its funding which will be calculated in the form of PDPA debt to the SOE.

It is important that the geothermal exploration process can continue to run. As is known, PT Pertamina Geothermal Energy and PDPA have established a joint venture company namely PT Geothermal Energy Seulawah (GES) to run the project. Total exploration cost is projected at $44 million where PDPA must deposit capital by 25 percent.

Mr. Muhsin said that “the grant from KfW was considered not suitable for Aceh and that the conditions were not suitable.” The grant was – so the local news piece – attached to a soft loan of $348 million, which was considered to have a too high interest rate (at 4%). “As we understand, soft loans are usually 1 percent, commercials alone are 2 percent, so that’s too high, so we do not use those funds now.”

Source: Beritakini