China Eximbank provides $1.26 billion loan for 1240MW Bangko Tengah (SS-8) Mine Mouth Power Plant Construction Project (Linked to Record ID#69235)

Project narrative

On May 24, 2018, the Export-Import Bank of China signed a $1.26 billion loan agreement with PT Huadian Bukit Asam Power (HBAP) — an Indonesia-incorporated special purpose vehicle and joint venture between Indonesian state-owned mining company PT Bukit Asam Tbk (45% ownership stake) and Chinese state-owned enterprise China Huadian Hong Kong Company Ltd (55% ownership stake) — for the 1240MW Bangko Tengah (SS-8) Mine Mouth Power Plant Construction Project. The loan carries the following borrowing terms: a 15-year maturity, a 5 year grace period, and an interest rate of LIBOR + a 2.85% margin. The $1.59 billion project is being implemented as an Independent Power Project (IPP) and financed according to a 75:25 debt-to-equity ratio. The transaction also appears to be backed by a Sinosure credit insurance and/or investment insurance policy. This loan was secured by (i.e. collateralized against) a pledge of all its existing 45% share ownership in PT Huadian Bukit Asam Power and shares that will exist in the future by PT Bukit Asam Tbk, as approved by the Ministry of State-Owned Enterprise on May 17, 2018. The purpose of the project is to construct a 1,240 megawatt (MW) coal-fired power station — with two 620MW generators (Unit 1 and Unit 2) — near the Tanjung Enim coal mine in South Sumatra Province (exact locational coordinates: -3.838679, 103.804133). The project site is located 2 km away from the Central Banko coal mine in Muara Enim, South Sumatra, Indonesia. The power plant’s coal-fired power generation units will be equipped with a super-critical boiler along with a high-efficiency steam turbine and a generator. The plant will also be fitted with a flue gas desulphurisation (FGD) system to control emissions. The Sumsel-8 power plant will consume up to 5.4 million tonnes (Mt) of coal a year, which will be sourced through a 1.5km-long enclosed conveyor belt from the Banko Tengah coal mine operated by PTBA in the Tanjung Enim area. The project also involves the construction of a 45 km transmission line from the power plant to the PLN substation in Muara Enim. On November 7, 2015, South Sumatra Governor Alex Noerdin attended a groundbreaking ceremony at the project site. Then, on October 19, 2017, HBAP signed a 25-year power purchase agreement (PPA) with Perusahaan Listrik Negara (PLN), which is an Indonesian government-owned corporation that has a monopoly on electricity distribution in Indonesia and generates the majority of the country's electrical power. China Huadian Hongkong Company Ltd. is the EPC contractor responsible for implementation. Inter World Steel Mills Indonesia and Mutiara Indah Anugrah are also involved as subcontractors. Inter World Steel Mills Indonesia has provided the steel solutions for the Sumsel-8 coal-fired power project, while the key equipment including boilers, turbines and generators were supplied by contractors based in China. Mutiara Indah Anugrah, a construction company based in Indonesia, was contracted to perform construction and installation works for the project in 2019. Construction commenced in June 2018. By the end of 2019, the project had achieved a 22% completion rate. In March 2020, the project's sponsor declared force majeure and stated that project would be delayed as a result of the COVID-19 pandemic. Unit 1 was originally expected to reach its commercial operations date (COD) in December 2021, while Unit 2 was originally expected to reach its commercial operations date (COD) in March 2022. As of November 2021, the project was 92.84% complete. In 2021, PLN submitted a letter of request to delay the commercial operation date of the project. In July 2022, PLN and HBAP agreed to adjust the PPA based on the delayed operation date. In August 2022, GBAP then signed a side agreement with PLN to delay the commercial operation date of the plant. The delays added additional construction and operational costs. The plant began commercial operations in October 2023.