Java 1 CCGT/FSRU, Indonesia

The procurement of the Java 1 combined gas-fired and floating storage and regasification unit (FSRU) was launched as an open tender, and was supposed to become the template for subsequent deals. Instead, PLN reversed its procurement policy after awarding Java 1, dashing hopes in the market for future open tenders in Indonesia.   

Java 1 is a 1,760MW combined cycle-gas turbine (CCGT) and FSRU which will be located on Indonesia’s most populous island, Java. 

Under pressure from foreign investors and lenders to conduct procurement more transparently, PLN invited tenders for Java 1 in June 2015. The transaction also drew the market’s attention because it was the first independent power producer project in Indonesia not to have a government guarantee for the state utility’s obligations. 

After several delays, the tender was relaunched in mid-2016.

The bidders objected repeatedly to the risk allocation in the original bidding documents and forced PLN to push back the bid submission date several times. 

One major stumbling block was PLN's decision to change the tariff currency for the draft power purchase agreement (PPA) to Indonesian rupiahs, if indexed to the US dollar. In the original draft bid documents, the PPA tariff was in US dollars, source have told IJGlobal.

Another was PLN’s failure to provide a termination agreement in US dollars.

Neither of the original issues, nor the arguably larger issue of LNG procurement risk allocation, had been fully resolved before PLN ploughed ahead with the tender process.

By late July, four bidders had emerged and PLN closed the bid submissions on 25 August 2016 without resolving the outstanding issues. 

The Marubeni, Pertamina and Sojitz consortium were named preferred bidder in late November of that year (2016).

The rival bidding consortia were: 

  • Indonesia’s Adaro and Sembcorp – advised by DBS
  • Indonesia’s Medco with Qatar’s Nebras and Korea Electric Power – Medco is understood to have retained SMBC as financial adviser
  • Mitsubishi and PLN subsidiary PTP – advised by MUFG Bank

Post tender negotiations

With so many issues to be ironed out, it was perhaps inevitable that even the first milestone, to sign the PPA within a month of the contract being awarded – or mid-December – was missed. The PPA was signed in February 2017, with a year to achieve financial close.

The biggest stumbling block, PLN’s decision to take on LNG procurement for the power plant, led to a series of delays as the sponsors and their advisers undertook additional due diligence.

The LNG procurement issue triggered a series of grace periods on the financial close deadline, according to sources who worked on the transaction.

As 2017 wore on, the Asian Development Bank (ADB) and Japan Bank for International Corporation (JBIC) came on board and the commercial bank loan went to market.

In the meantime, PLN reversed course on its procurement strategy in mid-2017. Going forward, developers would be expected to submit unsolicited bids after forming a 51:49 joint venture with PLN subsidiary Indonesia Power.

And with that decision, Java 1 turned out to be one of PLN's rare open tenders, rather than the template for future transactions as foreign investors had been hoping. 

Loan details

The commercial and multilateral bank loans were eventually signed in late October (2018). Financial close was achieved on 5 December.

Jawa Satu Power (JSP) and Jawa Satu Regas (JSR) – collectively called Jawa Satu (JS) – are the special purpose vehicles for the CCGT and FSRU components, respectively. 

The roughly $1.3 billion financing of the 25-year BOOT is split between three tranches: 

  • $604 million – JBIC
  • $400 million – syndicate of banks insured by Nippon Export and Investment Insurance
  • $300 million – ADB

The lenders in the bank syndicate, each provided a ticket of $80 million. All are equal mandated lead arrangers: 

  • Crédit Agricole 
  • Mizuho Bank
  • MUFG Bank
  • OCBC Bank
  • Société Générale

The 21-year senior amortised loan priced at around 125bp above Libor.

Shareholders in JSR and JSP differ. JSP has the following backers:

  • Marubeni
  • Mitsui OSK Lines
  • Pertamina
  • Sojitz

While a member of JS indicated assigning the some $250 million in equity was “more complicated as we have two separate project companies for power and FSRU, for ease of reference” stakes can be split as:

  • Marubeni – 40%
  • Pertamina – 40%
  • Sojitz – 20% 

JS will also construct a 52km, 500kV transmission line connecting the plant to the Java island's power grid, as well as for procuring the gas for the project. 

The CCGT's $900 million EPC contract went to a group consisting of: 

  • General Electric
  • Meindo Elang Indah
  • Samsung C&T 

Java 1 is anticipated to begin operations in mid-2021.

Advisers

Advisers to JS included: 

  • ING – financial
  • Shearman & Sterling – legal
  • Poyry – technical

Other advisory roles included: 

  • Ernst & Young – adviser to PLN 
  • Allen & Overy – adviser to commercial bank lenders

Asset SnapshotJava 1 CCGT Power Plant (1760MW)

Value:
USD 1,554.00m
Full Details

Transaction SnapshotJava 1 FSRU & CCGT Power Plant (1760MW) IPP

Financial Close:
18/10/2018
SPV:
Jawa Satu Power (JSP) /Jawa Satu Regas (JSR)
Value:
$1,775.00m USD
Equity:
$463.00m
Debt:
$1,312.00m
Debt/Equity Ratio:
74:26
Concession Period:
25.02 years
Full Details