As many as 40 Indonesian civil society organizations have asked the member of World Bank Group, the Multilateral Investment Guarantee Agency (MIGA) to refuse to guarantee loan facility to the National Electricity Company (PLN), an Indonesian state-owned company (project ID 14660 ​[1]​). If the guarantee is given, it will not only contradict global commitments on climate finance but will also hamper Indonesia’s energy transition because PLN still prioritizes the use of dirty coal energy.

This urge was conveyed by Indonesian civil society organizations in a letter sent to MIGA’s board of directors ​[2]​. The letter was sent in response to the requests from several potential lenders to MIGA to provide guarantee for loan facility to PLN which will be used for payments under the existing power purchase agreement to eligible independent power producers.

MIGA’s support for such a loan facility to PLN will only give a poor signal to the financial markets about the bankability of PLN and PLN’s commitment to a renewable energy transition. Global finance standards that have been widely adopted by private financial institutions – what MIGA also has to adopt – is that there is no new financing to any entity developing new coal-fired power plants.

“By providing guaranteed loan facilities to PLN, it is like MIGA providing vitamins to coal pandemic spreaders who do not want to follow the coal virus prevention protocol that has been adopted by many global financial institutions,” said Pius Ginting, Executive Director of Ecological and People’s Emancipation Action – AEER.

PLN itself is currently facing a financial crisis. With a margin of excess electricity supply that is predicted to reach 41% in the Java-Bali grid this year ​[3]​, the purchase of electricity from the new coal-fired power plant construction project will only increase the financial burden of this state-owned company.

Instead of having an action plan for energy transition to renewable energy sources that is ambitious, mature and transparent, PLN continues to support the construction of coal-fired power plants in Sumatra, Kalimantan and Sulawesi. From the data shown by the Global Coal Plant Tracker from Global Energy Monitor, a new 20 GW coal-fired power plant is in the pipeline. Including in the island of Java, which is already in the state of overcapacity, which is currently heavily supported by PLN, namely the controversial megaproject of Java 9-10 Coal Power Plant, Suralaya Banten (2GW), Indramayu CPP (2GW) and Cirebon 3 CPP (1GW).

Yuyun Indradi, Executive Director of Trend Asia said, “Looking at PLN’s financial performance, MIGA should refuse to guarantee PLN because what is currently a burden on PLN’s debt will ultimately be borne by the Indonesian people. PLN must change its business model that relies
on fossil fuels. PLN must also develop an adaptation strategy for the transition and transformation of business models that prioritize reducing economic and environmental burdens through clean, renewable, equitable and sustainable energy businesses. Cut loads by resting coal power plants that have been more than 25 years old, reducing over capacity by no longer building new coal power plants and starting to focus on the transition to renewable energy. ”

Nur Hidayati, National Executive Director of WALHI said, “It is time for the government to intervene with PLN to stop the construction of a new coal-fired power plant, which in turn adds to the state’s financial burden, which means that it also adds to the burden on the people who are struggling to face the impact of the COVID-19 pandemic. MIGA’s submission of a guarantee request is nothing more than an attempt to subsidize dirty energy generating companies that want to maintain their polluting business. It is time for these kinds of tricks to stop.”

Nezir Sinani, Co-Director at Recourse said: “MIGA’s Board of Directors and management need to take the calls of Indonesian civil society groups on board and vote against making more money available to a company that is so heavily invested in coal and destroying people’s livelihoods, while contributing to climate change. It is a no-brainer that such a project should not go ahead. MIGA needs to align with institutions that bring an end once and for all to any type of lending to companies and institutions that are invested in coal.” (*)
Notes for editor

1] ​

2] ​ 3] ​

Indonesia environmental and social justice organizations signing the letter are: #BersihkanIndonesia | Trend Asia | Enter Nusantara | JATAM | JATAM Kalimantan Timur | Yayasan Lembaga Bantuan Hukum Indonesia | LBH Semarang | Auriga Nusantara | Kanopi Hijau Indonesia | Yayasan Srikandi Lestari | Anak Padi | Koalisi Perempuan Indonesia, Wilayah Sumatera Utara | Atap Hijau Indonesia | Cahaya Perempuan WCC Bengkulu | Gerakan Cinta Desa | LBH Pekanbaru | FITRA Riau | LBH Padang | Fossil Free Palembang | WALHI Jawa Barat | WALHI Kalimantan Selatan | Pena Masyarakat | Sajogyo Institute | Greenpeace Indonesia | Transparency International Indonesia | LBH Bandung | LBH Yogyakarta | Koalisi Rakyat Untuk Keadilan Perikanan | AEER | Indonesia | Eksekutif Nasional WALHI | Indonesia Corruption Watch | KRuHA Indonesia | Koaksi Indonesia | Perkumpulan Prakarsa |

Koalisi ResponsiBank Indonesia | FNKSDA | Perkumpulan Pembela Lingkungan Hidup (P2LH) Aceh | Lembaga Tiga Beradik Jambi | Hutan Kita Institut (HaKI)