China Eximbank provides overseas investment loan for 180MW Asahan-1 Hydroelectric Power Plant Construction Project

Project narrative

On December 23, 1996, PT Bajradaya Sentra Nusa (BDSN) — a special purpose vehicle and joint venture — signed a Power Purchase Agreement (PPA) with PT PLN (Persero), the state-owned power utility company in Indonesia, for the 180MW Asahan-1 Hydroelectric Power Plant Construction Project (Asahan-1 HEP). However, due to the Asian Financial Crisis in the late 1990s, construction of the power plant was suspended. BDSN signed an EPC contract with China Huadian Engineering Corporation on March 18, 2004. The EPC contract went into effect on December 31, 2004. However, the project was subsequently put on hold due to financing difficulties. Then, in February 2006, China Huadian Hongkong Ltd. purchased a 70% equity stake in BDSN, which made BDSN a joint venture of China Huadian Hongkong Ltd. [70% equity stake], PT Pembangkitan Jawa-Bali (PLN Nusantara Power) [26.05% equity stake], PT Duta Graha Indah Tbk [3.5% equity stake], and PT Bajradaya Sentranusa [0.45% equity stake]. Shortly thereafter, a project feasibility study was undertaken. Then, in March 2006, China Eximbank issued a letter of intent to China Huadian Hongkong Ltd. regarding its interest in financing the 180MW Asahan-1 Hydroelectric Power Plant Construction Project. Later that year, in August 2006, China Eximbank approved the provision of one or more overseas investment loans for the 180MW Asahan-1 Hydroelectric Power Plant Construction Project. The China Eximbank financing agreements were finalized in December 2006. China Huadian Hongkong Ltd., in turn, on-lent the China Eximbank loan proceeds of the loan to BDSN. A $248,560,000 term loan facility agreement between China Huadian Hongkong Ltd. and BDSN was signed on December 1, 2006. It carried an estimated interest rate of 7.5% and an estimated maturity of 11 years. The borrower was responsible for making 22 semi-annual repayments. PT Pembangkitan Jawa-Bali pledged its equity stake in BDSN as as a source of collateral for China Huadian Hongkong Ltd. The total estimated cost of the 180MW Asahan-1 Hydroelectric Power Plant Construction Project is $359.91 million. It was financed according to a debt-to-equity ratio of 70:30. The purpose of the project was to construct a run-of-river hydroelectric power project — with 2 x 90 MW turbines — in North Sumatera Province in Indonesia. The power plant uses the existing flow of Asahan River to produce electricity and it has no large scale dam or reservoir build for the project, as it is a run-of-river hydroelectric power plant. It takes advantage of Asahan River flow that receives water from its natural source, Lake Toba. Geographically, the power plant is located downstream of Lake Toba and upstream of the existing Asahan 2 (Siguragura) hydroelectric power plant, a large dam power plant built in 1981. The objective of the project was to supply zero emission energy to Sumatera Grid, a grid with relatively carbon-intensive electricity supply that is located in Sumatera island and that had no interconnection with the grid in other islands (e.g. Java, Kalimantan). Upon completion, the project was expected to achieve power production of 1,175,000 MWh per annum to be delivered to PLN and 100,000 MWh per annum as secondary electricity generation. China Huadian Engineering Corporation (CHEC) served as the engineering, procurement and construction (EPC) contractor responsible for project implementation. Construction began on January 29, 2007. The power plant officially commissioned on June 28, 2010.