JAKARTA (TheInsiderStories) – The Asian Development Bank (ADB) has approved a US$600 million loan to help the state-run power producer PT Perusahaan Listrik Negara (PLN), to expand electricity access and promote renewable energy in eastern Indonesia. The program also includes two grants, at $3 million each, from the Japan Fund for Poverty Reduction and the Asia Clean Energy Fund.
At the same time, the agency and Indorama Ventures Public Co. Ltd., signed a $100 million financing package to reduce the environmental impact of plastic and promote a circular economy by boosting the capacity of the company’ plastic recycling plants in Indonesia, India, the Philippines, and Thailand.
The second phase of the sustainable energy access in eastern Indonesia–electricity grid development program supports efforts by PLN to expand electricity access and improve service reliability in nine provinces in the outer regions of Kalimantan, Maluku, and Papua. The first phase of the program began in 2017 and covered eight provinces in Sulawesi and Nusa Tenggara.
“The program will also to support eastern Indonesia’ economic recovery from the pandemic and contribute to equitable and resilient growth,” said ADB Southeast Asia Energy Director Toru Kubo in an official statement released on Tuesday (11/24).
The Fund expects Indonesia’ economy to contract by 1.0 percent in 2020, compared with a 5.0 percent expansion in 2019. To cushion the economic shock, the government has announced free electricity for 24 million poor households and a 50 percent discount for seven million more households, which could reduce PLN’ revenue and financing capacity.
The government has been pushing to develop the country’ economic growth centers beyond Java, where more than half of the population live. Residents in eastern Indonesia currently have limited access to electricity, with up to 56 percent of households having inadequate or no electricity access in Papua and 28 percent in Maluku, much higher than the national average of 4 percent.
The government has prioritized 433 villages currently without access to electricity, all of them located in the eastern provinces of Papua, West Papua, East Nusa Tenggara, and Maluku. Expanded electrification in eastern Indonesia is a key part of the government’ infrastructure investment plan, with the goal of electricity for all by 2024.
The government plans to increase the share of renewable energy in the total energy mix to 23 percent by 2025, up from 13 percent in 2016. It also hopes to eliminate diesel use to the extent possible, a task most challenging in the remote eastern regions.
“The program will increase PLN’ delivery of electricity powered by renewable energy to remote communities by six-fold and reduce indoor kerosene and wood consumption, which is expected to generate significant environmental and social benefits,” adds by ADB energy specialist, Diana Connett.
The first phase of the program in Sulawesi and Nusa Tenggara has proved successful. By the end of 2019, the number of new customers increased by 1.53 million, exceeding the program’ target of 1.37 million. The second phase of the program aims to provide electricity to 1.55 million new customers by 2024 across the nine provinces.
The results-based loan to PLN, with a sovereign guarantee from the Government of Indonesia, will support the utility’ efforts to install medium- and low-voltage power distribution infrastructure. It will also help PLN staff better manage assets and safely dispose of waste equipment, as well as improving procurement and payment systems.
The grant from the Asia Clean Energy Fund will help renewable energy plants apply advanced technologies to improve system design and maintenance. The Japan Fund for Poverty Reduction grant will support measures to install power connections for poor households and help PLN conduct a longitudinal social and gender impact assessment.
Other ADB energy initiatives include two ongoing private sector loans supporting wind and solar power generation in eastern Indonesia. They also include policy-based loans that, along with technical assistance, help strengthen sector governance and fiscal sustainability, boost private sector investment, and promote clean and efficient energy options.
While, with Indorama, the plants will recycle polyethylene terephthalate plastics widely used in beverage bottles. The finance package comprises $50 million from ADB and $50 million from the ADB-administered Leading Asia’ Private Infrastructure Fund. A $150 million loan will be provided by the International Finance Corporation, and $50 million from Deutsche Investitions- und Entwicklungsgesellschaft mbH.
Vice-president for ADB, Ashok Lavasa, commented, “There is a rising global demand for recycled plastic packaging. ADB’ support will help Indorama to meet this demand by collecting and treating plastic waste that would otherwise have been released into the oceans.”
Mismanagement of all plastic waste damages the marine ecosystem. Its estimated that Asia accounts for more than 80 percent of all plastics released into the ocean. Globally around half of the waste is recycled. The plants to be built under the project are expected to be fully operational by 2022, and will ensure that nearly five billion additional bottles are diverted from waste annually.
The company is a Thailand-listed, global business committed to develop technologies and processes that use post-consumer PET and polyester waste materials as feedstock for the future. Indorama is listed on the Dow Jones Sustainability Index and operates 125 manufacturing facilities in 33 countries, across 5 continents.
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