Case study on the 80 MW Muara Laboh geothermal project, West Sumatra
A case study published by the Asian Development Bank (ADB) provides details on its financing of the 80 Muara Laboh geothermal project by Supreme Energy, Engie and Sumitomo in West Sumatra, Indonesia.
The Asian Development Bank (ADB) has published a short case study on its financing for the 80 MW Muara Laboh geothermal project in West Sumatra, Indonesia.
The project is developing geothermal steam resources through production and injection facilities in the Liki Pinangawan Muaralaboh concession area and construct, operate, and maintain a single power generation unit with a total capacity of approximately 80 MW.
The concession is located in the South Solok Regency, 150 km southeast of Padang, West Sumatra. The project is being developed and implemented under a 30-year power purchase agreement (PPA) with PLN (the off-taker) and a 20-year support from the Ministry of Finance, as stipulated under a business viability guarantee letter (BVGL).
PLN will build 80 km of transmission lines from the plant site to two 150 kilovolt (kV) substations near Muara Laboh and Sungai Rumbai. The substations will connect power from the generation unit to the Sumatra grid through an existing 275 kV transmission line.
The project is being developed by Supreme Energy Muara Laboh (SEML). SEML is owned by Supreme Energy of Indonesia, ENGIE of France and Sumitomo Corporation of Japan. For ENGIE, the project is their first high temperature geothermal power generation plant in the world.
Total costs for the project have been estimated as high as US$625m. The exploration works alone are reported to have cost around US$130m. Financing for the project was secured in February 2017.
The Japan Bank for International Co-operation (JBIC) has contributed US$198m from its own book. The Asian Development Bank (ADB) agreed a $109m financing package. This is one of the first transactions to receive funding from their “Leading Asia’s Private Infrastructure” Fund (LEAP). The Fund is capitalized by $1.5 billion equity from Japan Bank for International Cooperation (JBIC).
ADB also led a syndicate of commercial banks on the rest of the financing. The syndicate includes: BTMU, Mizuho and SMBC.
Total co-financing has been reported to amount to ~$440m
The commercial portion of the debt is guaranteed (insured) by Nippon Export and Investment Insurance (Nexi), the Japanese government export credit agency. This is the first time NEXI has covered a risk of geothermal resources capacity associated with a geothermal power project financing. Their involvement is due to Japanese industrial giant Sumitomo Corporation’s role in the construction of the project. Coverage is US$132 million with a tenor of approximately 20 years. Political Risk is 100% covered, Commercial Risk 90%.
This project involves a $70 million loan from ADB with $19.25 million Clean Technology Fund (CTF) concessional financing and a $20 million parallel loan funded through Leading Asia’s Private Sector Infrastructure (LEAP) Fund.
In its case study, the Asian Development highlights its value addition to the deal:
- Through CTF concessional financing, motivate developers to complete more challenging exploration programs and reach financial close.
- Demonstrate the bankability of the new geothermal power purchase agreement and the replicability of structuring solutions to manage complexities and resource risks presented by geothermal independent power producers.