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The Asian Development Bank (ADB) announced on Wednesday the first disbursement of US$120 million under a $600 million results-based lending (RBL) program to strengthen the electricity grid in Sumatra, after the state-owned power company Perusahaan Listrik Negara (PLN) met the conditions for release of the funds.
“Disbursing against results helps ensure that ADB assistance can be utilized by PLN in a flexible manner and through its own systems, but with a focus on development outcomes,” said Steven Tabor, ADB Country Director for Indonesia. ”Modernizing the power grid is a prerequisite for success of the government’s 35 gigawatt power generation expansion program. ADB is proud to help support that program, while also assisting efforts to reach the remaining 16% of the Sumatran population with no access to modern energy services.”
Tabor said that an efficient and strong electricity grid should underpin Sumatra’s efforts to transform itself from a commodity producer into a major industrial center of Indonesia.
Future disbursements will be made annually over the next four years, after PLN has achieved agreed results in strengthening Sumatra’s power transmission and distribution system. The cost of the overall grid strengthening program in Sumatra is in the range of $7.3 billion, and financing for this program is being mobilized from various sources.
ADB approved in December 2015 two loans—$575 million from its ordinary capital resources and $25 million from the ASEAN Infrastructure Fund—totaling $600 million for a RBL program to strengthen the Sumatra electricity grid in Indonesia. This was the first ever RBL program globally in the energy sector, as well as ADB’s first loan to a state owned enterprise, PLN, with a Government of Indonesia guarantee.
This RBL loan will finance the upgrading of the power grid on the island of Sumatra to meet growing power demand efficiently and effectively. It will also connect at least 13 million new customers to an expanded and stronger power grid. The program utilizes the RBL financing instrument to support PLN’s program for expanding and improving Sumatra’s grid, and seeks to help improve the PLN’s corporate systems for the design and delivery of the grid upgrading program.