MANILA, PHILIPPINES -- The Asian Development Bank (ADB) will provide a loan of up to $50 million, supported by the Clean Technology Fund, to share risks with the private sector during the project development and exploration phase of the Rantau Dedap geothermal project in Indonesia.
"This innovative loan demonstrates the depth of ADB support for deploying clean energy technologies that can significantly displace coal and oil-fired power," said Lazeena Rahman, Investment Specialist in ADB'sPrivate Sector Operations Department. "In addition, it will help unlock Indonesia's geothermal potential by bridging a key financing gap in the market."
Indonesia has an estimated 29,000 MW of geothermal resource potential, but less than 5% of this potential has been developed. Proving commercial viability for a geothermal project requires a much higher upfront investment than for any conventional fossil fuel project. As such, the lack of an early-stage risk sharing option remains a fundamental obstacle to geothermal power expansion not just in Indonesia, but globally.
The Rantau Dedap project is located in South Sumatra. During this initial phase, the project will conduct the geothermal resource exploration involving the drilling and testing of wells. If developed to the targeted capacity, the project is expected to be able to support at least 240 MW of geothermal power generation capacity over 30 years and an estimated net reduction in carbon dioxide emissions equivalent to 1.1 million tons per year.
The project will be implemented under a 35-year geothermal operating license, a 30-year energy sales contract with Perusahaan Listrik Negara, the national electricity utility company, and a business viability guarantee from the Ministry of Finance.
The borrower, Supreme Energy Rantau Dedap, is a special purpose vehicle established in Indonesia to explore and develop the geothermal resources, and to construct, operate, and maintain the completed power plant and facilities. The shareholders of the project company are GDF Suez, Marubeni Corporation and Supreme Energy.
A core ADB objective is to address the risks and mitigate the impacts of climate change in developing member countries in Asia. The loan follows ADB's$350 million financing for the landmark 320 MW Sarulla Geothermal Power Development Project, which reached financial close earlier this year, also supported by the Clean Technology Fund.