Milbank LLP advised Asian Development Bank (“ADB”), International Finance Corporation (“IFC”), Sumitomo Mitsui Banking Corporation (“SMBC”) and Mitsubishi UFJ Financial Group (“MUFG”) as lenders in connection with US$222 million loans for the development and financing of the Riau Independent Power Producer (IPP) project in Sumatra, Indonesia. The loans have a 20-year tenor and an equity commitment of US$71 million.
The Riau IPP is a 275-megawatt power plant and one of the first of a new generation of gas-fired IPPs. Expected to become operational in May 2021, the power plant will supply electricity to Sumatra’s grid and aims to mitigate the electricity deficit in the region. Under the deal, the state-owned Perusahaan Listrik Negara’s (“PLN”) will take responsibility for supplying the gas to the IPP, while PT Medco Ratch Power Riau (“MRPR”), which is jointly owned by Indonesia’s PT Medco Power Indonesia and Thailand’s Ratchaburi Electricity Generating Holding, will be responsible for constructing and operating the 40km gas pipeline connecting to the power plant, as well as the power plant itself. Unlike the majority of ECA/DFI financed projects in Indonesia, this deal does not include a guarantee from the Indonesian government of PLN’s obligations as power offtaker.
This deal marks the first Indonesian IPP where ADB and IFC have both acted as lenders, with the commercial banks participating through ADB’s B Loan product. The deal was signed on March 20, 2019 and is expected to close in May 2019.
The Singapore-based Milbank team was led by Global Project, Energy & Infrastructure Finance partner James Murray, working with special counsel Melissa Lewis, and associates Andrew Gibb, Rosaline Yusman and Jooyoung Song, among other members of Milbank’s Asia team.
Mr. Murray said: “We are incredibly proud of the role our Milbank team played in this unique and innovative transaction, which will provide a blueprint for similar transactions in Indonesia moving forward. The ‘tolling’ element, where PLN takes responsibility for supplying gas to the plant, is a departure from the more typical approach in Indonesia and the power purchase agreement includes a number of new provisions which are being used on other deals that have come to market since.”
The head of Milbank’s Asia practice, partner David Zemans, also commented that “We look forward to continue working with leading sponsors and lenders on transactions in Indonesia and throughout the Asia-Pacific region to help meet the region’s growing energy needs.”
