The Asian Development Bank (ADB) said Monday that it has provided a loan of 350 million U.S. dollars for the construction of a 320-megawatt geothermal power plant in North Sumatra, Indonesia.
Under the loan package for the Sarulla Geothermal Power Development Project, the Manila-based lender said 250 million U.S. dollars will come from its ordinary capital resources while 80 million U.S. dollars will come from the ADB Clean Technology Fund. The remaining 20 million U.S. dollars will be drawn from the Canadian Climate Fund for Private Sector in Asia.
The project requires a total loan package of 1.17 billion U.S. dollars. Six commercial banks will also co-finance the loan package while the ADB and the Japan Bank for International Cooperation acted as lead structuring banks.
Proponents of the project are Itochu Corp., Kyushu Electric Power Co., Ormat International, and Medco Power Indonesia.
The project will be developed and implemented under a 30-year energy sales contract with Perusahaan Listrik Negara, the national electricity utility company, a 30-year joint operating contract with Pertamina Geothermal Energy, and a 20-year guarantee from Indonesia's Ministry of Finance.
The ADB said in a statement that its climate finance capabilities were instrumental in establishing the first commercially-financed, utility-scale geothermal independent power plant in Indonesia in more than a decade.
It added that the climate funds were structured as an " innovative" loan tranche that bridged the financing gap between banks and investors to maintain the financial viability of the project.
The Sarulla Geothermal Power Development Project is envisioned to provide clean power to an Indonesian grid currently dominated by aging coal and oil-fired power plants. The plant is expected to reduce 1.3 million tons of carbon dioxide emissions per year upon its completion in 2018.
Indonesia currently uses coal and oil to produce 65 percent of its electricity to fuel its economic growth.