Shearman & Sterling advised Abu Dhabi Future Energy Company PJSC (Masdar) and PT PJB Investasi (PJBI), a subsidiary of Indonesian state-owned offtaker PT PLN (Persero), on the $114 million financing of a 145MWac floating solar photovoltaic power project on the Cirata Reservoir in Indonesia, the largest project of its kind in South East Asia.
Financial close was achieved on August 3, 2021. The development and financing process was completed despite significant logistical hurdles arising from the continuing COVID-19 pandemic and required significant ingenuity and innovation, both in structuring and execution of the transaction, to overcome the practical challenges faced in closing a project financing transaction in these difficult times.
This is the first IPP in Indonesia to be financed by commercial banks on an uncovered basis, a critical milestone in the development of the Indonesian energy market. This is also the first renewable project to be done under Presidential Regulation 4/2016, which requires a PLN subsidiary to hold a 51% stake in the project company to (among other things) facilitate local capacity building and knowledge transfer. It was also the first investment by Masdar in the region. PLN’s subsidiary having a 51% stake in the project required the development of bespoke synthetic security arrangements and corporate governance arrangements, including to overcome the restrictions on granting security over the project company’s assets and PJBI’s shares in the project company under the World Bank negative pledge, and create a bankable template for the future projects under development by PLN under the same regime.
The Shearman & Sterling team was led by partner Jean-Louis Neves Mandelli, supported by associates Ashiq Aziz and Kyle Koh, and trainee Andrew Sears-Black (all Singapore-Project Development & Finance).