JBIC signs $763m loan agreement for Donggi-Senoro

By Romel S. Gurky

The Japan Bank for International Cooperation (JBIC) said on Friday it signed on Nov. 12, a loan agreement totaling up to about US$763 million (JBIC portion) with PT. Donggi-Senoro LNG (Donggi-Senoro) in Indonesia.

The loan, provided in project financing, is cofinanced with private financial institutions, including The Bank of Tokyo-Mitsubishi UFJ, Ltd., Mizuho Bank, Ltd., Sumitomo Mitsui Banking Corporation, and Korea Exim Bank (KEXIM). Nippon Export and Investment Insurance (NEXI) will provide insurance and KEXIM will provide guarantee for part of the portion cofinanced by private financial institutions.

In this project, Donggi-Senoro, in which Mitsubishi Corporation (MC), Korea Gas Corporation, PT. Pertamina (Persero), the state oil company of Indonesia, and PT. Medco Energi Internasional Tbk. have equity stakes, will construct and operate a liquefied natural gas (LNG) plant to produce 2 million tons of LNG annually in the center of the eastern coast of Sulawesi Island and sell LNG produced there to Japanese electric power companies and others for about 13 years. This loan will provide funds required to construct the LNG plant.

In the aftermath of the Great East Japan Earthquake, the Japanese energy environment has become increasingly severe. In particular, it is an important policy issue for Japan to secure a stable supply of LNG, which, at present, accounts for more than 40 percent of the composition of its power sources.

Thus the "New Strategic Energy Plan," decided by the cabinet in April 2014, advocates the diversification of LNG supply sources.

Although Indonesia used to be the largest LNG exporter to Japan until the first half of the 2000s, import volume from the country has been decreasing in recent years and is expected to continue to decrease in the future.

?Given this prospect, this project plans to enable Japanese electric power companies to take delivery of more than 60 percent (1.3 million tons per year) of LNG produced. Thus JBIC's support for this project will contribute to diversifying the supply sources of LNG and securing its stable supply for Japan,? the firm said.

JBIC said it has also held a series of consultations with the Indonesian government by utilizing the framework of the policy dialogue and worked with it toward facilitating LNG projects including this project.

Editing by Johannes Simbolon