Indonesia:
World Bank Support for Coal
Indonesia – Climate Change
• World’s largest coal exporter
• Many newly built and planned coal plants in
India and Vietnam rely on imported coal
from Indonesia, including Tata Mundra
UMPP
Indonesia – Climate Change
• GHG emissions per capita are growing faster than
GDP per capita
• Current energy growth path relies on increasing
contributions from carbon intensive sources - coalfired power.
• Unless there is a shift from the current government
plan, IEA (2007) projects Indonesia’s fossil fuel
related GHG emissions could triple by 2025
Current Government Energy Growth Plan:
Fast Track I & II Power Projects (under development)
Year adopted
Power source
Coal
Gas
Geothermal
Hydropower
Total
2006
2010
Fast Track I Fast Track II
Total
Total
Percent of
(MW)
(MW)
Projects Generation Generation
14,611
3,672
84
18,283
71%
560
1,300
4
1,860
7%
440
3,867
46
4,307
17%
1,174
3
1,174
5%
15,611
10,013
137
25,624
Overview of World Bank Involvement
WORLD BANK
SUPPORT
INDONESIAN
GOVERNMENT
COAL DEVELOPMENT
World Bank:
Infrastructure
Development
Policy Loans
(2007-2010)
PPP Framework
providing industry
subsidies
Purukcahu Cangkuang
Railway
World Bank: Loan
to IIGF of $30
million
World Bank:
$480 million
standby faciity
for IIGF
IFC: Transaction
Advisor
Indonesia
Infrastructure
Guarantee Fund
(IIGF):
Guarantee of $34
to CJPP
Guarantees in
pipeline for other
projects
Sumsel (South
Sumatra) Mine-Mouth
Plants (600 MW and
1200 MW)
Central Java Power
Project (2000 MW)
World Bank Infrastructure
Development Policy Loans
• Four I-DPLs covering 2007 to 2011 totaling $850 m
aimed at roads, water, and electricity
• Support to GOI infrastructure development plan,
including the Fast Track power projects
• Framework for public-private partnerships (PPP):
– Indonesia Infrastructure Guarantee Fund (IIGF)
– Indonesia Infrastructure Financing Facility (IIFF)
Indonesia Infrastructure Guarantee
Fund (IIGF)
• Guarantees for infrastructure projects under
the PPP scheme, including Fast Track
power projects
• Key to obtaining finance
• World Bank $480 m standby facility and
additional $30 m IIGF loan (FY2013)
Indonesia Power Sector PPP
Framework
• PPP framework provides government incentives
including:
–
–
–
–
–
–
–
VAT tax exemptions,
import duty exemptions,
income tax rate reductions,
accelerated rates of depreciation,
land tax exemptions,
building tax exemptions,
the IIGF guarantees
• Subsidies to private investors for power projects
whether fossil fuel or renewable.
Indonesia Infrastructure Guarantee
Fund (IIGF) – Coal Projects
• Central Java Power Plant – 2,000 MW ($40 million
guarantee)
• Kalimantan - Puruk Cahu-Bangkuang Coal Railway
(for exports)
• Coal-Fired Mine-mouth Sumsel Power Plant 9 1,200 MW
• Coal-Fired Mine-mouth Sumsel Power Plant 10 600 MW
Central Java Power Plant
• IFC Transaction Advisor:
– analyze project fundamentals (grew from GOIproposed 800 MW to 2,000 MW)
– promote and secure project to investors
– prepare PPP contract
Central Java Power Plant
• If it built, it will pump 10,8 million tones of
CO2 into the atmosphere annualy
• It will also release 226 kg of mercury each
year
• It will also release 16200 tonnes of SOx,
20200 tonnes NOx, and 610 tonnes of PM
2.5 each year
Local opposition to
IIGF supported projects
• Central Java Power Plant
– Lawsuit against the Batang regent for making a bylaw for
the project that contradicted regulations to protect the
Marine Natural Park
– Multiple protests have been held by thousands of residents
who insist that the power plant will harm the environment
and threaten their livelihoods
– The financial close was recently delayed for 6 months due
to local villagers refusing to give up their land
Local opposition to
IIGF supported projects
• Kalimantan - Puruk Cahu-Bangkuang Coal
Railway (for exports)
– US$3 billion, 385 km rail project to connect coal mines in
northern Kalimantan to a port at Batanjung in southern
Kalimantan
– More than a dozen Central Kalimantan-based
organizations oppose the coal railway based on
environmental, social, and economic concerns.
– Railway construction will accelerate deforestation and
undermine goals of Central Kalimantan as a REDD+ pilot
province.
Conclusions
• World Bank Indonesia Infrastructure DPLs initiated
policies and institutions that promote coal
development in Indonesia
• Instead of guiding Indonesia – already the world’s
largest coal exporter – onto a low-carbon
development path, the Bank’s infrastructure
program has fortified a coal-intensive future
Recommendations
• Withdraw the Bank’s financial backing from the Indonesia
Infrastructure Guarantee Fund (IIGF) unless the IIGF
stops support for the Central Java Power Project and all
other coal projects.
• Ensure that the Bank’s Energy Directions’ limit on coal
financing is comprehensive and applies to all forms of
support, including development policy loans, financial
intermediaries, and advisory services.