ADB to Support Indonesia's Geothermal Project
29 July 2014 16:00 WIB
TEMPO.CO, Manila - The Asian Development Bank (ADB) will provide a loan of up to US$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-fueled energy," said Lazeena Rahman, the Investment Specialist in ADB’s Private Sector Operations Department. "It will help unlock Indonesia's geothermal potential by bridging a key financing gap in the market," she added.
The project will be implemented under a 35-year geothermal operating license, a 30-year energy sales contract with state-owned Perusahaan Listrik Negara (PLN) and a business viability guarantee from the Ministry of Finance.
ADB's core objective is to address the risks and mitigate the impacts of climate change in developing member countries in Asia. The loan follows ADB's US$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.
The Rantau Dedap project is located in South Sumatra. During the initial phase, the project will conduct geothermal resource exploration involving drilling and testing of wells. The project is expected to be able to generate at least 240 MW of geothermal power for over 30 years and an estimated net reduction in carbon dioxide emissions equivalent to 1.1 million tons per year.
Indonesia has an estimated 29,000 MW of geothermal resource potential, but only less than five percent 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 only in Indonesia, but globally. (*)
