DBS : Bank DBS Indonesia provides energy transition financing for Indika Energy | Bahasa

Bank DBS Indonesia provides energy transition financing for Indika Energy | Bahasa

Indonesia, 18 Apr 2022 - Indika Energy's subsidiary PT Jaya Bumi Paser (JBP) has signed an agreement for a US$27.5 million loan facility from Bank DBS Indonesia consisting of short and long-term funds to finance the company's activities. The agreement was signed by JBP Director Dominicus Wimbuh Wibowo and Head of Institutional Banking Group at Bank DBS Indonesia Kunardy Lie. The funds will be used to finance the development of new and renewable sustainable biomass fuels that comply with the Forest Stewardship Council (FSC) standards in East Kalimantan. This is in line with Indika Energy's commitment to encouraging investment in energy transition and to supporting efforts to reduce national emission by 29% on own efforts or by 41% with international assistance by 2030, as stated in the Nationally Determined Contribution (NDC) document.

Sustainable financing is an important element in the transition from fossil fuel-based energy to low-carbon and environmentally friendly green energy sources. The sustainable financing does not only consider the financial benefits in making investment decisions but also environmental, social, and governance, or ESG, factors as a parameter of the company's sustainability.

Under the collaboration, Bank DBS Indonesia provides transition financing for Indika Energy to fund JBP's project to develop wood pellets as a new and renewable biomass energy source. JBP is a holder of a Forest Utilisation Business Permit (PBPH) with an industrial plantation forest concession covering an area of 23,590 hectares in East Kalimantan currently planted with calliandra trees to produce wood pellets as a biomass energy source.

JBP will undertake the project in compliance with the FSC standards, from mapping the project area, land clearing, planting, harvesting to the wood pellet production process. JBP is currently in the process of obtaining a FSC certificate. The wood pellets produced by JBP can be used as a source of fuel in Biomass Power Plants (PLTBm). Wood pellets are classified as sustainable green energy because they are a non-fossil energy source and the amount of time taken between planting and harvesting is fairly short, which is 1 to 2 years.

Kunardy Lie, Head of Institutional Banking Group at Bank DBS Indonesia, said, "As an energy transition advocate, we are committed to achieving net-zero emissions by 2050 or sooner. We are pleased to partner with Indika Energy through this transition financing. Through transition financing the banking industry plays a key role in promoting and participating in maintaining environmental sustainability and stability. More and more companies are becoming aware of the importance of the ESG aspects in their operations, and one of the most urgent matters is to foster green development in the industry sector that is responsible for intensive carbon emissions. And this is where the financial sector plays a role to help carbon-intensive companies during the transition to shift away from fossil fuels. This is also in line with our commitment to supporting the government in accelerating sustainable finance in Indonesia."

Similarly, Indika Energy is also committed to achieving carbon neutrality by 2050 through sustainability initiatives in its operations, including by zeroing in on the ESG aspects. Indika Energy is also committed to increasing the non-coal sector's contribution to total revenue to 50% by 2025.

Director & Group Chief Financial Officer Indika Energy Retina Rosabai said, "Indika Energy is diversifying as part of its business development strategy, including in the areas of new and renewable energy (NRE), nature-based solutions, electric vehicles, and digital technology. The development of NRE and nature-based solutions is part of our efforts to support the national energy transition that obviously requires huge investments and needs to be supported by the banking sector and other stakeholders. We are very enthusiastic about this partnership as it is the first transition financing agreement between Indika Energy and Bank DBS Indonesia. We hope this is a good start for Indika Energy's sustainable business development going forward."

DBS Group's sustainability agenda is based on three sustainability pillars, namely Responsible Banking, Responsible Business Practices, and Creating Social Impact. Under the Responsible Banking pillar, DBS Bank provides ESG-based services, including sustainability linked-loan, sustainability linked-bonds with Bank DBS Indonesia acting as arranger, and sustainable-project financing.

According to DBS Group, the main indicator of an asset or activity udergoing 'transition' is its level of decarbonisation. With the launch of the Sustainable and Transition Finance Framework and Taxonomy in June 2021, DBS Groups is the first to capture demand for transition finance in Asia, with opportunities in six markets, notably Singapore, India, Indonesia and China. Over the past 2.5 years, DBS Group has clinched 100 deals worth S$12 billion (US$8.72 billion).

Bank DBS Indonesia's commitment has been recognized by the media and industry through several awards for a series of sustainability programmes in the categories of social entrepreneurs, employees and social organisations. The awards include Highly Recommended for the Responsible Business Awards 2021 in the Purpose-Driven Communications category from Reuters; Indonesia Corporate Sustainability Award 2021 in the categories of Responsible Business Practices, Employee Volunteering, Digital Cause Promotions, and Corporate Sustainability Warrior from SWA Network media; and Highly Recommended for The Drums Awards for Social Purpose 2021 from The Drums.

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