ADB, Indonesia partners sign MOU on retirement of first coal power plant under Energy Transition Mechanism

ADB, Indonesia partners sign MOU on retirement of first coal power plant under Energy Transition Mechanism

The Asian Development Bank (ADB) today joined with key partners in Indonesia to sign a memorandum of understanding (MOU) to jointly explore the early retirement of the first coal-fired power plant owned by an independent power producer (IPP) under ADB’s Energy Transition Mechanism (ETM).

The signing, which took place on the sidelines of the G20 Leaders’ Summit in Bali, was attended by ADB President Masatsugu Asakawa, Cirebon Electric Power (CEP) President Director Hisahiro Takeuchi, PT PLN (Persero) President Director Darmawan Prasodjo, and Indonesian Investment Authority (INA) CEO Ridha D. M. Wirakusumah.

The MOU agrees to open detailed discussions to accelerate the retirement of Cirebon-1, a 660-megawatt plant owned by CEP in West Java.

The planned transaction aims to achieve significant carbon dioxide emission reductions through a replicable model that can be applied to other IPPs in Indonesia, other parts of Asia and the Pacific, and beyond. Once a definitive agreement is reached among the parties, it is anticipated that ADB would provide an early retirement facility in the form of senior debt, on the condition that the tenor of the power purchase agreement between CEP and PLN will be shortened.

“This MOU with our trusted partners in Indonesia is a landmark moment for ADB’s Energy Transition Mechanism and the clean energy transition it will advance,” said Mr. Asakawa. “As Asia and the Pacific’s climate bank, ADB is proud to be showing the viability of this approach, supported by the outstanding leadership of Indonesia. We encourage other financial stakeholders to engage in the just and affordable energy transition here and across Asia and the Pacific.”

“ETM provides an innovative approach for companies like CEP to make the transition from coal to clean energy while providing reliable and affordable power for Indonesia’s energy infrastructure,” said Mr. Takeuchi. “This MOU is a big step forward for Indonesia and we are proud to be working with the Asian Development Bank and Indonesian Investment Authority.”

“PLN is committed to being a leader in Indonesia’s energy transition toward net zero emissions in a just and affordable manner,” said Mr. Prasodjo. “PLN’s commitment to clean energy and working through the ETM with IPPs, such as CEP, can significantly accelerate the energy transition.”

“INA’s role is to help attain Indonesia’s sustainable development and to build wealth for the country’s future generations,” said Mr. Wirakusumah. “The ability of INA to complement the other partners with equity can complete the suite of financial tools that can help to scale up ETM activities in Indonesia.”

ETM is a regional, transformative, blended-finance program that seeks to retire existing coal-fired power plants on an accelerated schedule and replace them with clean power capacity. ETM is one component of a larger set of initiatives both domestic and multilateral, that aims to help Asia and the Pacific mitigate the worst impacts of climate change, such as extreme sea level rise and destructive weather events.

The MOU was signed at an event in which Indonesia launched its ETM Country Platform, a government financing and investment framework that will fund and manage the country’s energy transition activities. ADB signed an additional MOU with PT Sarana Multi Infrastruktur (Persero) (“PT SMI”) to provide support, including staff resources and capacity building for the platform.

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.

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