IFC, a member of the World Bank Group, is supporting the long tern operation of the 180MW Asahan 1 hydroelectric plant in North Sumatra, Indonesia, by taking a minority stake in Indonesian independent power producer PT Bajradaya Sentranusa (BDSN) and providing a $280 million loan facility.

The financing agreements, which comprise IFC loans of $75 million as well as syndicated and parallel loans of $205 million, aim to bolster BDSN’s financial sustainability and reduce Indonesia’s reliance on traditional fuel sources. The parallel-loan lender is PT Indonesia Infrastructure Finance, a private financing institution, while the syndicated-loan lenders are KDB (Korea Development Bank), Maybank International Labuan Branch, Natixis Singapore Branch, Societe Generale, and Sumitomo Mitsui Banking Corporation.

“With this strategic and financial support from IFC and other lenders, we look forward to providing more affordable and environmentally friendly hydropower energy to meet our country’s growing electricity needs," said Adek Julianwar, President Director of BDSN.

The investment in BDSN is part of IFC’s strategy of building long-term partnerships in renewable-energy sectors that power development. Asahan 1 has been providing reliable power at a low cost since it started operating in January 2011 and is now a cornerstone of the country’s regional electricity grid. Estimated savings from BDSN’s power generation is up to $250 million per year based on the marginal cost of production in the North Sumatra grid of around 30 US cents per kilowatt hour using diesel fuel.

“We are committed to supporting private sector companies like BDSN to provide low-cost renewable energy that will improve the stability of Indonesia’s electricity supply," said IFC Indonesia Country Manager Sarvesh Suri. "Affordable hydropower will help Indonesia meet its growing demand for reliable power to support development."

Indonesia, with a vibrant economy and a young population that is the fourth-largest in the world, has been undergoing rapid urbanization with rising power needs. The development of hydropower has huge potential in the country as only 11 percent of its electricity was generated by hydropower in 2012.

BDSN’s principal shareholders are Singapore-based Fareast Green Energy Pte. Ltd. and PT Pembangkitan Jawa Bali (PJB), a subsidiary of PT PLN (Persero), Indonesia’s state-owned electric utility company and a key stakeholder in BDSN since its inception.