ADB Finances Indonesia’s Clean Energy Future with Geothermal Expansion
The Asian Development Bank (ADB) has taken a significant step forward in supporting Indonesia’s green energy transition.
By signing a $92.6 million financing agreement with PT Supreme Energy Muara Laboh (SEML), ADB has reaffirmed its commitment to expanding geothermal power production in one of the world’s richest geothermal regions. This ambitious project, located in Muara Laboh, West Sumatra, will see the development of a new geothermal power plant with a capacity of approximately 83 megawatts (MW), alongside the expansion of existing geothermal facilities.
Financing Indonesia’s Geothermal Potential
ADB’s financial package for the Muara Laboh project is both comprehensive and innovative. It consists of $38.8 million from ADB’s ordinary capital resources, a $38.8 million syndicated ADB B loan facilitated by Sumitomo Mitsui Banking Corporation, and a $15 million concessional loan from the Australian Climate Finance Partnership (ACFP). By acting as the lead structuring bank, ADB has managed to attract private commercial capital to Indonesia’s geothermal Independent Power Producer (IPP) sector for the first time.
This financing arrangement includes contributions from parallel lenders such as the Japan Bank for International Cooperation and a consortium of commercial banks backed by Nippon Export and Investment Insurance. This coordinated effort underscores the importance of public-private partnerships in driving the development of sustainable energy projects.
ADB Country Director for Indonesia, Jiro Tominaga, highlighted the significance of the collaboration, stating: “Investment in geothermal power can be challenging, making the support of ACFP and the Government of Australia vital to mitigate risks and deliver a project that helps Indonesia to meet its clean energy targets and deliver affordable electricity.”
A Model for Sustainable Energy Development
Indonesia boasts the world’s largest geothermal energy reserves, estimated at 23.1 gigawatts (GW). However, only a small fraction of this potential has been tapped. The Muara Laboh project aims to bridge this gap by advancing Indonesia’s utilisation of geothermal resources. By reducing greenhouse gas emissions and ensuring energy security, the project aligns with Indonesia’s broader goals for sustainable development.
ADB’s involvement in the project also reflects its long-standing expertise in Indonesia’s geothermal sector. Since 2013, ADB has been instrumental in financing several high-impact geothermal projects, including Muara Laboh Stage 1, Rantau Dedap, and the Sarulla geothermal power project. This latest investment continues to build on that foundation, showcasing ADB’s ability to navigate the complexities of geothermal energy development.
Catalysing Economic Growth and Community Development
Beyond its environmental benefits, the Muara Laboh project is poised to deliver significant economic and social advantages. SEML President Director Nisriyanto emphasised: “This project not only strengthens our renewable energy portfolio but also contributes to the local economy by creating jobs and fostering community development.”
The project’s construction, operation, and maintenance phases will generate employment opportunities, stimulating economic activity in West Sumatra. Moreover, the focus on sustainable energy solutions underscores the importance of aligning economic growth with environmental stewardship.
ACFP’s Role in De-risking Green Investments
The Australian Climate Finance Partnership (ACFP) has played a pivotal role in the success of this project. Managed by ADB and funded by the Australian Government, ACFP provides concessional blended financing to de-risk high-impact climate adaptation and mitigation projects in the Pacific and Southeast Asia.
By bridging market gaps and mobilising private sector capital, ACFP ensures that transformative projects like Muara Laboh reach the implementation stage.
A Visionary Partnership
SEML, the project’s developer, represents a collaboration between Indonesia’s PT Supreme Energy, Japan’s Sumitomo Corporation, and INPEX Corporation. This joint venture underscores the value of international partnerships in advancing geothermal energy development.
By leveraging the expertise and resources of its stakeholders, SEML is well-positioned to make a meaningful impact on Indonesia’s renewable energy landscape.
ADB’s Broader Commitment to Sustainability
Since its establishment in 1966, ADB has been at the forefront of fostering economic growth and reducing poverty across Asia and the Pacific. Owned by 69 members, including 49 from the region, ADB has consistently championed projects that drive prosperity, inclusivity, resilience, and sustainability.
Through its support for the Muara Laboh project, ADB is reaffirming its mission to create a sustainable future. The initiative not only addresses Indonesia’s energy needs but also contributes to global efforts to combat climate change.
Paving the Way for a Greener Tomorrow
The Muara Laboh geothermal expansion project represents a critical step in Indonesia’s transition to a greener energy future. By combining international expertise, innovative financing, and a commitment to sustainability, ADB and its partners are setting the stage for transformative change.
With abundant geothermal resources and strong institutional support, Indonesia is well on its way to becoming a global leader in renewable energy.
