Paiton 3: Indonesian benchmark

The brownfield financing for Paiton 3 sets an important bench­mark in the Indonesian market, as it is the first independent power plant deal to be completed since the 1990s’ Asian fin­an­cial crisis, and the first to be signed under JBIC’s umbrella note with the Indonesian Ministry of Finance.

PT Paiton Energy is an existing 1,230MW coal-fired power plant located in East Java, Indonesia. It com­menc­ed commercial operations in 2000 and its power output is sold to state-owned Perusahaan Listrik Negara (PLN) under 30-year long term power pur­chase agree­ment (PPA). Following a tender, PE was granted the right to build, own and operate a new 815MW coal-fired power plant at the existing Paiton complex, to be implement­ed through an amendment to the existing PPA.

Total project costs for Paiton 3 are $1.519 billion, with an 80/20 debt/equity ratio, a debt package of $1.215 billion and $304 million in equity. The debt has an 18-year tenor and com­prises three tranches: a $395 million US dollar JBIC direct facility, a $334 million equivalent JBIC direct facility denominated in Yen and a $486 million JBIC extended political risk guarantee-cover­ed commercial bank facility denominated in yen). The commercial banks are Bank of Tokyo Mitsu­bishi UFJ, Mizuho, Sumitomo Mitsui Banking Corporation, BNP Paribas, ING, Credit Agricole, HSBC and Sumitomo Trust. A commitment fee of 50bp is paid for each of the three tranches. And pre-completion the bank funded tranche has a margin of 270bp which is thought to rise to around 300bp post-completion. Pre-completion the JBIC dollar loan is priced at 169bp and the JBIC yen loan is priced at 178bp.

The financing was a protracted affair given the eco­nomic back­drop. PLN announced the limit­ed tender for the Paiton III ex­pansion in February 2007. In August 2007 the project company for Paiton I, PT Paiton Energy (PE), was awarded the exclusive right to negoti­ate the power purchase agreement (PPA) for the Paiton III coal-fired power plant expansion project and a heads of agreement between PE and PLN was signed. The spon­sors signed the 30-year PPA with PLN on 4 August 2008. The financing in its ultimate form had been held up from Novem­ber 2009 to close in March 2010 because JBIC was wait­ing for a letter of comfort from the Indonesian government, with­out which JBIC was not in a position to provide the debt and cover.

Paiton 3

Status: Closed 30 March 2010
Description: $1.21 billion debt for the 815MW expansion of its 1.23GW coal-fired power plant in East Java, Indonesia
Sponsor: Paiton Energy (International Power, Mitsui, Tokyo Electric Power and BHP)
Mandated lead arrangers: JBIC, Bank of Tokyo Mitsubishi UFJ, Mizuho, Sumitomo Mitsui Banking Corporation, BNP Paribas, ING, Credit Agricole, HSBC and Sumitomo Trust
Financial adviser: BTMU
Borrower’s legal counsel: Paul Weiss Rifkind Wharton & Garrison
Lenders’ legal counsel: Latham & Watkins