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Baker & McKenzie Advises On Rajamandala Hydroelectric Power Project.

11 November, 2014

 

Baker & McKenzie has advised on the Rajamandala 1 x 46.6 MW run-of-the-river hydroelectric power plant to be constructed in Citarum Basin, Cianjur Regency, West Java, Indonesia. The project is being developed by Kansai Electric Power Co. (Kansai Electric) and PT Indonesia Power (a subsidiary of state-owned electricity distributor PT Perusahaan Listrik Negara (PT PLN)).  The project, which achieved financial close in August 2014, is the first major power project in Indonesia in recent years to successfully raise international limited recourse project financing without the Government of Indonesia providing a business viability guarantee.

 
The cross-border team involved lawyers from member firms Hadiputranto, Hadinoto & Partners in Indonesia and Baker & McKenzie.Wong & Leow in Singapore. The transaction was led by Chew Chin and Erik B├ęgin in Singapore, and Indri (Mita) Guritno in Jakarta.


Luke Devine, Asia Pacific Head of Baker & McKenzie’s Energy, Mining and Infrastructure group, commented: “Baker & McKenzie has had a long history of advising on power projects in Indonesia and we are delighted tohave worked with PT Rajamandala Electric Power on this landmark project. Indonesia’s fast developing economy has led to a significant increase in demand for electricity generation and this is one of a number of energy-related projects Baker & McKenzie has advised on in the country in recent years. The project signals the ongoing trend in Indonesia to diversify energy production and reduce overall dependency on fossil fuels. This mirrors a wider trend in Southeast Asia and globally to develop electricity generation potential from low-carbon emission and renewable energy sources.”

 
“The successful project financing of the Rajamandala project using a MIGA guarantee product also indicates there may be avenues other than the traditional Indonesian government guarantees for sponsors and lenders to mitigate PLN default risk as they look for opportunities in the growing electricity infrastructure sector,” Devine added. “The relative scarcity of Government guarantees has long been cited as the reason why Indonesia’s ambitious Independent Power Producer (IPP) program has not reached the lofty goals set by the Indonesian Government. However, the Rajamandala project shows that sponsors and international lenders do have other structuring options available to them, and these projects can be successfully project financed without a Government guarantee.”

 

Other parties involved in the deal include Allen & Overy, which advised the lenders.

 

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