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Plant is first to be shuttered under transition fund mechanism
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ETM raises funds from 14 partners, including HSBC, StanChart
Indonesia’s state wealth fund
signed a non-binding agreement to help fund the early retirement of a
660-megawatt coal-fired plant in West Java, the first deal to be made under a
newly-set up energy transition fund.
The money will be used to retire Unit
1 of the plant located in the city of Cirebon, some 200 kilometers away from
the capital Jakarta, according to a statement. The coal plant, which started
operations in 2012, is jointly owned by Marubeni
Corp., PT
Indika Energy, Samtan
Co., Korea
Midland Power Co. and Jera
Co.
Southeast Asia’s largest
economy is seeking to raise billions of dollars via the Energy
Transition Mechanism to help phase out its coal-fired plants,
reducing its dependence on the dirty fuel that makes up more than half the
national power capacity. Indonesia has pledged to achieve net zero emission by
2060.
“The severe impact of Covid 19 and
climate change will definitely hinder our fiscal space, so for all of us to
deliver our credible commitment, financing is very important,” said Finance
Minister Sri Mulyani Indrawati at the ETM launch ceremony in Bali on Monday.
“The ETM will be our platform to crowd in funding for climate actions.”
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Fourteen institutions have committed
to funding the ETM, including HSBC
Holdings Plc, Standard Chartered PLC, Asian Development Bank, Japan
Bank of International Cooperation and Bloomberg Philanthropies. The
organization’s founder Michael Bloomberg is the majority owner of Bloomberg LP,
the parent of Bloomberg News.
Such
fund mechanism would act as a conduit for international funding toward energy
transition in Indonesia, such as for the estimated $20
billion Just Energy Transition Partnership deal with US and
Japan set to be announced on Tuesday. “That demonstrates the level of
preparation that has gone into this work,” ADB Vice President Ahmed Saeed said
in an interview.
Cirebon plant was chosen because of
its owner’s interest and it has suitable financial structure, ADB said in a
separate statement. The plant may be retired as early as 2037, or 15 years
earlier than its original lifespan, with plans to replace it with renewable
energy.