China Eximbank leads $1.251 billion syndicated loan for 510MW Batang Toru Hydropower Plant Construction Project

Project narrative

The 510MW Batang Toru Hydropower Plant Construction Project is designed as an Independent Power Project (IPP). Its total expected cost is $1.67 billion and it is being financed according to a debt-to-equity ratio of 75:25. The dam was initially proposed by NSHE in 2012. Then, on December 21, 2015, NSHE signed a Power Purchase Agreement (PPA) contract with Perusahaan Listrik Negara (PLN), Indonesia’s state-owned power distribution company. In September 2017, PT North Sumatra Hydro Energy (NSHE) — a special purpose vehicle — signed a syndicated loan agreement with Bank of China, China Eximbank, China Minsheng Bank, and other lenders for the 510MW Batang Toru Hydropower Plant Construction Project. The proceeds of the loan were to be used by the borrower to partially finance a $1.035 billion EPC contract between NSHE and Sinohydro, which was signed in November 2015. The purpose of the project is to install a 510-megawatt (MW) hydroelectric power plant — with four 4x127.5MW generators (Unit 1, Unit 2, Unit 3, Unit 4) — along the Batang Toru River in South Tapanuli District of North Sumatra Province (exact locational coordinates: 1°34′49.4″N 99°10′07.8″E). Upon completion, it is expected that the power plant will produce 2,214 GWh annually and meet 15% of the peak load electricity needs of North Sumatra Province. The project’s originally expected completion date is December 31, 2021. Sinohydro is the EPC contractor responsible for implementation. The pre-construction stage of the project began in mid-2016 and construction began around June 2017. However, by March 2018, the bank syndicate withdrew its support for the project on environmental grounds. On October 29, 2018, Sinohydro signed an implementation agreement for the operations and maintenance of the overseas power plant. Then, in August 2019, construction was suspended after some employees of Sinohydro were terminated because they were unable to properly carry out their duties and 125 replacement workers were unable to reach the Batang Toru project site (due to a travel ban). On June 18, 2020, Muhammad Ikhsan Asaad, who was responsible for overseeing the project for state-owned utility PLN, said the Batang Toru hydropower plant was supposed to begin commercial operations (COD) in August 2022, based on the agreement between PLN and project developer PT North Sumatra Hydro Eenergy (NHSE). However, the plant's COD was further delayed in 2020 (to 2025) due to the COVID-19 pandemic and environmental concerns. In November 2021, SDIC Power Holdings Co., Ltd. (SDIC Power) — a Chinese state-owned company — acquired a 69.9975% ownership stake in NSHE. The minority shareholders in NSHE are Pembangkitan Jawa Bali Investment (PJBI) and Asia Hydria Pte. Ltd (Asia Hydria). They hold 25% and 5.0025% ownership stakes in NSHE, respectively. Then, on November 24, 2022, SDIC Power announced that China Eximbank had agreed to lead the issuance of a $1.251 billion syndicated loan to NSHE for the 510MW Batang Toru Hydropower Plant Construction Project. In March 2023, a syndicate of banks (led by China Eximbank) signed a loan agreement with NSHE for the 510MW Batang Toru Hydropower Plant Construction Project. The Sinosure-backed loan reportedly carries an 18-year maturity and an 8-year grace period. The project’s groundbreaking ceremony took place on January 8, 2022. The construction of access roads to the project site took place during calendar year 2022. By December 2022, the project had achieved a 26% completion rate. The first batch of concrete was poured into the dam on November 17, 2023. By July 2024, the project had achieved a 62% completion rate. The dam was capped on March 24, 2025 after the last batch of concrete was poured. The project's expected completion date was pushed from December 2021 to December 2026. The Batang Toru Hydropower Plant site is the only known habitat of the Tapanuli orangutan. Scientists and environmentalists claim that, in addition to impacting 10% of the critically endangered Tapanuli orangutan's already dwindling habitat, infrastructure for the dam (roads and high-voltage power lines) will fragment the orangutan population below viable levels by degrading important wildlife corridors and increase the likelihood of even further development. The area is also home to other critically endangered animals, including the Sumatran tiger, Sumatran orangutan and Sunda pangolin. Between 70 and 100 square kilometers (27 and 39 square miles) could be cleared for the dam and reservoir. However, a spokesman for NHSE said that less than 6 square kilometers would be cleared and they would voluntarily abide by international standards for environmental and social impact assessment. Although many indigenous community members have sold their land to NHSE, some are vowing to fight the project. They have held local demonstrations and even flew to Jakarta to protest in front of the presidential palace. The proposed dam will reportedly affect the livelihoods of some 100,000 people who live downstream. The project lies near a fault line, and there is a risk of earthquakes, but this was not mentioned in the environmental impact assessment (EIA) for the project. For these and other reasons, the Indonesian environmental group WALHI is planning a lawsuit to halt construction. On March 4, 2019, Bank of China released a public statement, noting that it 'will evaluate the project very carefully and make prudent decisions by duly considering the promotion of green finance, the fulfillment of social responsibility as well as the adherence to commercial principles.' Three days earlier, on March 1, 2019, activists staged a series of coordinated protests outside BOC branches and Chinese diplomatic missions in cities including Jakarta, New York, Hong Kong, Manila and Johannesburg. The activists called upon Bank of China to rescind its funding for the Batang Toru hydropower project, saying that allowing it to proceed would devastate the most critical areas of the Batang Toru ecosystem in northern Sumatra and drive the Tapanuli orangutan (Pongo tapanuliensis) to extinction.