Siemens Power Ventures of Germany and PowerGen of Britain wrapped up a US$1.65 billion Indonesian power plant yesterday by signing a financing package in London one week ahead of the deadline.
Construction of the 1,220 MW coal-fired Jawa Power Project in east Java is expected to begin immediately, and the plant will probably go into operation in 1999.
J.P. Morgan Securities, financial adviser to the consortium, said yesterday that Indonesia's power generation market was becoming more and more competitive, forcing developers to accept lower rates of return.
JP Morgan infrastructure director Lee Jin-yi would not reveal the exact rate of return for the Jawa project, but said the basic tariff was 6.59 US cents per kilowatt hour.
That is 9.7 per cent lower than the 7.3 US cent tariff for an earlier foreign-funded power plant at the same location.
Turnkey contractor Siemens has a 50 per cent stake in the project, while operations and maintenance partner PowerGen owns 35 per cent and the Indonesian Bumipertiwi Tatapradipta owns 15 per cent.
Together they will contribute $330 million equity.
A hefty $900 million will come from export credit agencies, with the German Hermes Kreditversicherungs providing $500 million and the US Export-Import Bank loaning $400 million.
Kreditanstalt fur Wiederaufbau of Germany is leading another $250 million, which is backed by political risk insurance from the German Government.
In addition to bank loans, eight US institutional investors led by Prudential and Teachers have agreed to take up a private placement of $200 million of senior notes.
Mr Lee said the private placement helped improve the competitiveness of the project's electricity pricing and enhanced the overall return on equity.
The repayment of the principal would not begin until the last four years of the 15-year agreement, allowing more of the early earnings to go to investors.
Although the Indonesian Government had not guaranteed the project, it wrote a strongly worded support letter ensuring the power purchaser would be able to meet its payments to the Jawa plant, Mr Lee said.
Siemens, PowerGen and their Indonesian partner have set aside an extra $160 million to cover any cost overruns.
The partners signed a 30-year power purchase agreement with state utility PLN on April 4 last year.
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