Chinese banks pledge more loans for Indonesia's power projects
Monday, April 12 2010 - 02:21 AM WIB
Chinese Ambassador to Indonesia Zhang Qiyue said the financing commitment for some of these power projects was expected to be signed during the visit of Premier Wen Jiabao to Jakarta in late April.
?Many agreements are being prepared [to be signed during the visit]. For example, our big banks are considering giving commercial loans for projects covering manufacturing, agriculture, power plants, and many more,? Zhang told The Jakarta Post, Kompas, and Media Indonesia in press briefing recently.
Chinese banks were the major lenders for the government?s first 10,000 MW electricity fast track program.
She added that loan commitments would now be given for some of the power plant projects under the government?s 10,000 MW electricity fast track program. ?Yes. I hope that some Chinese companies will continue to take part in the Phase Two 10,000 MW fast track program ,? Zhang said.
Zhang?s statement was reaffirmed by Fang Qiuchen, minister counselor in the economic and commercial office of the embassy of China. ?Since the Indonesia government launched the second crash electricity program, many Chinese enterprises have shown interest in relevant projects. I do think China?s financial institutions, including Chinese banks will be interested in financing these projects,? Fang said.
Compared to others multilateral finance institutions such as the Asian Development Bank (ADB) and Japan Bank for International Cooperation (JBIC), Chinese banks are relatively new leaders for PLN project, PLN?s head of corporate finance Yusuf Hamdani told the Post.
?China started to finance PLN?s project in 2004 when the Chinese government provided soft loans for the 230 MW Labuhan Angin power plant [in North Sumatra],? Yusuf said.
He added that these first loans amounted to Rp 1.5 trillion (US$166 million), which was relatively small compared to the loans received by PLN. However, Yusuf said, loans from Chinese banks increased significantly in 2008 when China EXIM Bank, Bank of China, and China Development Bank, agreed to provide around Rp 40.58 trillion for power plants under the Phase One 10,000 MW fast track program.
?The Chinese banks committed to provide about 45 percent of the total investment required for all these projects [under the first 10,000 MW program] which needed a total of Rp 89.91 trillion. Loan disbursements are [still] being made in line with the progress of construction,? Yusuf said.
He added the Chinese banks big contribution in the Phase One fast track program had made China the biggest single lender to PLN. ?From 1997 to 2009, PLN secured as much as Rp 183.288 trillion in finance commitments from bonds, foreign and local banks contributed about 23 percent of this total commitment,? Yusuf said.
He added that the aggressive moves of the Chinese banks were triggered both by the fast track program and the rapid growth of the power plant equipment industry In China. The Phase One first track program was very attractive for lenders as the government provided full guarantees for loans received by PLN. At the same time China?s domestic power plant equipment manufactures rapidly expanded their production capacity.
Yusuf said the three biggest power plant machine producers in China were Shanghai Electric, Harbin Power Equipment Company Ltd, and Dongfang Electric. ?Each of these companies can produce power plant machinery annually with a capacity of PLN which is between 27,000 MW and 29,000 MW,? Yusuf said. Aside from the three big companies, China also has many small to middle sized power equipment producers, he added.
Yusuf said that the loans provided by the Chinese banks helped support its power plant equipment manufacturing industry. ?They have huge production capacity and the loans help them export the equipment,? he said.
PLN is starting tendering out some power plants project under the second phase of the fast track program. Yusuf said both Chinese contractors and financial institutions showed great enthusiasm to take part in the new 10,000 MW program.(*)