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ADB to explore early retirement of Indonesian coal power plant
CEP’s 660MW facility in West Java seeks to transition to clean energy under bank’s blended finance programme
The Asset 14 Nov 2022

The Asian Development Bank (ADB) on Monday (November 14) signed a memorandum of understanding with partners in Indonesia to jointly explore the early retirement of a 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 on Monday (October 14), 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) chief executive officer  Ridha D. M. Wirakusumah.

Earlier, in the Philippines, ACEN, the energy platform of conglomerate Ayala Group, announced the completion of an ETM transaction, which enables the early retirement of its 246MW coal plant in Calaca, Batangas province.

Under the MOU in Bali, the parties will 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-Pacific, and beyond.

Once a definitive agreement is reached among the parties, ADB is expected to 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,” says 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 is a regional, transformative, blended-finance programme that seeks to retire existing coal-fired power plants on an accelerated schedule and replace them with clean power capacity. The mechanism is one component of a larger set of initiatives, both domestic and multilateral, that aims to help Asia-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) to provide support, including staff resources and capacity building for the platform.

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