Milbank, Tweed, Hadley & McCloy LLP has advised Indonesian power provider PT. Tanjung Power Indonesia (TPI) in securing approximately US$560 million in debt and equity financing for the construction of a 2 x 100-megawatt coal-fired power station in South Kalimantan, the southernmost province on the island of Borneo. TPI is a joint venture between Indonesia’s PT Adaro Power and PT EWP Indonesia, a subsidiary of Korea East-West Power Co. Ltd. PT Adaro Power’s affiliate, PT Adaro Indonesia, has nearby coal mines and will supply most of the power plant’s coal.
TPI has a 25-year power purchase agreement with Indonesia’s state-owned electricity distributor, PLN, with PLN’s payment obligations being guaranteed by the Indonesian government under its Fast Track II/BVGL scheme.
The Kalsel power plant is being built by Hyundai Engineering Co. Ltd. and its Indonesian affiliate PT. Hein Global Utama, using circulating fluidized bed technology (a leading-edge process designed to recapture most coal-firing emissions before they are discharged into the atmosphere).
Senior debt is being provided by The Bank of Tokyo-Mitsubishi UFJ, Ltd., DBS Bank Ltd., The Hongkong and Shanghai Banking Corporation Limited, Korea Development Bank and Korea Development Bank, Singapore Branch, Mizuho Bank, Ltd., and Sumitomo Mitsui Banking Corporation, Singapore Branch. The majority of the debt is covered by political risk insurance provided by Korea Trade Insurance Corporation (K-Sure). Equity bridge loans are being provided by BTMU, DBS, Mizuho, and SMBC.
The Milbank team was led by Singapore-based Global Project, Energy and Infrastructure Finance partners David Zemans and James Murray, with help from special counsel Melissa Lewis and associates Andrew Gibb and Martin Wong. Additional support in Asia was provided by Seoul-based partner Young Joon Kim and associate Brian Youn.
“Milbank is very pleased to have assisted TPI in achieving financial close for this very important project that will help Indonesia address its electricity needs and diversify its sources of power,” Mr. Zemans said. “As the country’s economy continues to grow, and with it the demand for electrical power, Indonesia’s abundant natural resources will be key to maintaining a steady and dependable supply of electricity.”
The Kalsel IPP closing follows on the heels of the successful financial closings in 2016 for the US$210 million Hasang hydroelectric project in Sumatra and the US$4.3 billion Central Java coal-fired power station, which on completion will be one of the largest in Asia. Milbank is also currently advising on a number of other notable projects in the Indonesian power/renewables, oil and gas and infrastructure sectors.
Milbank has a long history of working on the largest and highest-profile transactions in the Indonesia’s natural resources sector over the last two decades.
