State utility company PT PLN concluded Friday a Rp 4.30 trillion (US$378.27 million) loan deal from domestic banks to finance five coal-fired power plants, which are part of the company's first 10,000 megawatt (MW) crash program.
The deal means the power company has now secured around 65 percent of the total financing needed for the crash program, which covers the construction of 35 power plants.
Witnessed by Finance Minister Sri Mulyani Indrawati, Fahmi Mochtar, PLN's president director, and the domestic banks' senior executives signed the financing commitments, which comprised three loan packages, on Friday.
The lenders involved are Bank Negara Indonesia (BNI), Bank Rakyat Indonesia (BRI) and six provincial government-owned development banks (BPDs).
Fahmi said loan payment periods were set for 10 years, including three years of grace at the start.
"The interest is floating based on JIBOR (Jakarta Interbank Offering Rate)," Fahmi said.
He added the loans would cover 85 percent of the cost estimated for the five projects, with the company covering the remaining 15 percent.
Mulyani said that the loan agreements showed that the intermediation process between Indonesia's banks and the country's real sectors remained in good shape, despite the global financial crisis.
"These days all banks are becoming extremely selective in giving loans. Thus, the current loans are extraordinary," Mulyani said
She cited the contrary example of banks in the US and Europe.
"Although those banks have received bailouts by their governments, they are still reluctant to give loans," Mulyani said.
Mulyani also praised the BPDs for finally taking part in financing the 10,000 MW program. She said the liquidity of the banks was often in surplus as they had yet to invest much in real sectors.
"Most of the time BPDs put their money in bonds. It's good now the banks give loans for real projects. In order to maintain our economic growth at the expected level amid the crisis, it's important for us to keep the infrastructure projects going," Mulyani said.
The government expects the economy to grow this year by between 4.5 percent and 5.5 percent.
PLN's loan for the 10,000 MW program projects are guaranteed by the government.
The 10,000 MW power program was launched in 2006 to meet the increasing electricity needs across the nation, especially for the Java-Bali system, where demand has been increasing at an average rate of 6.72 percent per year.
Fahmi said the program included 35 power plants, 10 of them in Java and Bali, while the remaining 25 were off the two main islands.
He added the program in total needed $8 billion to be finished. With Friday's commitment, PLN has now secured $5.5 billion and is seeking another $2.5 billion both from local and foreign banks.
The 10,000 MW power program is expected to be completed by 2011.
Fahmi said that by the end of this semester, PLN would open tenders for the second 10,000 MW program.