KfW offering $2.3 bn in loans for renewable energy projects in Indonesia

Alexander Richter 3 Sep 2015

German development bank KfW will be offering up to $2.3 billion in loans for state-funded renewable energy projects, which includes geothermal projects, e.g. by Pertamina.

Reported from Jakarta today, Germany will support the development of new and renewable energy resources in Indonesia by offering loans worth up to EUR2 billion (US$2.25 billion) from the country’s development bank, Kreditanstalt für Wiederaufbau (KfW).

The bank will provide the loans to state-funded projects in the energy sector within the next five years, focusing on environmentally friendly energy.

KfW Office Jakarta senior sector coordinator Christoph Twerenbold said the bank would provide the loans as part of an agreement between Indonesia and Germany in 2013 in which the two countries agreed to bilateral cooperation on climate change and energy.

“That’s why we are now preparing a quite ambitious portfolio,” he told The Jakarta Post on Tuesday.

The projects to be financed comprise small and big hydro power plant (PLTA) projects, geothermal, solar power, as well as electricity network transmission.

Christoph also said that the bank’s main partner was state electricity firm PLN, which has received EUR 300 million in loans this year, out of the bank’s EUR 2 billion portfolio.

The bank expected to channel EUR 300 million to the energy sector this year, while the other EUR 1.4 billion would be extended until 2019.

“We see huge potential, a huge need for investment in infrastructure because nothing has been done in the last 10 years. So now everything has to come up to secure electricity supply,” he said.

President Joko “Jokowi” Widodo has pledged to provide an additional electricity supply of 35,000 MW within a five-year period to cope with the demand surge from industrial activities. Around 25 percent of the total 35,000 MW power program would come from new and renewable energy sources, or equal to 8,750 MW of electricity.

As a tropical and archipelagic country, Indonesia has abundant resources, including hydro power and solar energy. The country is also estimated to have around 28 gigawatt (GW) in geothermal potentials that can generate electricity.

However, development of the potentials is sluggish due to financing issues, unfavorable regulations and land acquisition.

For the 8,750 MW itself, Energy and Mineral Resources Minister Sudirman Said previously said that the country needed Rp 402 trillion ($28.58 billion) in investment.

KfW declined to disclose the details of the loan, but stated that it would be a long-term soft loan, with interest of less than 7 percent.

It also has opened the possibility of working with state-owned oil and gas firm Pertamina.

Source: The Jakarta Post