Indonesia Gets State Wealth Fund to Retire 660MW Coal Plant

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(Bloomberg) — Indonesia’s state wealth fund signed a non-binding agreement to help fund the early retirement of a 660-megawatt coal plant in West Java, the first deal to be made under a newly-set up energy transition fund.

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The money will be used to retire Unit 1 of the plant located in the city of Cirebon, some 200 kilometers away from the capital Jakarta. The plant is managed by PT Cirebon Electric Power, owned by Marubeni Corp., PT Indika Energy, Samtan Co., Korea Midland Power Co. and Jera Co.. 

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Southeast Asia’s largest economy is seeking to raise billions of dollars via its Energy Transition Mechanism to help phase out coal-fired plants earlier, reducing its dependence on the dirty fuel that makes up more than half the national power capacity. Indonesia has pledged to achieve net zero emission by 2060.

“The severe imapact of covid 19 and climate change will definitely hinder our fiscal space, so for all of us to deliver our credible commitment, financing is very important,”said Finance Minister Sri Mulyani Indrawati at the ETM launch ceremony in Bali on Monday. “The ETM will be our platform to crowd in funding for climate actions,” 

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Indonesia plans to early retire 15 gigawatt of coal plants, she said. Fourteen institutions have committed to funding the ETM, including HSBC Holdings Plc, Bloomberg Philanthropies, Standard Chartered PLC, Asian Development Bank and Japan Bank of International Cooperation.

The ETM platform would involve adopting a model called “blended finance,” that taps different types of investors including sovereign, multilateral and private, instead of bilateral funding. That means countries like Indonesia can retain more authority over their domestic energy strategy instead of signing on to policy-binding deals.

Bloomberg Philanthropies founder Michael Bloomberg is the majority owner of Bloomberg LP, the parent of Bloomberg News.