By David Lawder
NUSA DUA, Indonesia (Reuters) -Indonesia, the Asian Development Bank and a private power firm said on Monday they are teaming up to refinance and prematurely retire a coal-fired power plant, the first such project under a groundbreaking carbon emissions reduction programme.
The 660-megawatt Cirebon 1 power plant in West Java would be refinanced in a $250 million to $300 million deal on condition that it be taken out of service 10 to 15 years before the end of its 40- to 50-year useful life under a memorandum of understanding (MOU), Asian Development Bank (ADB) officials said.
The Manila-based multilateral lender and Indonesia's Finance Minister Sri Mulyani Indrawati announced the MOU with independent power producer Cirebon Electric Power in Bali on the sidelines of the G20 leaders summit.
The deal, final details of which would be refined under the MOU, could eliminate as much as 30 million tonnes of greenhouse gas emissions over a 15-year period - the equivalent of taking 800,000 cars off the road, ADB estimates.
The agreement is the first under the ADB's Energy Transition Mechanism (ETM), an initiative to blend private investment funds, public finance and philanthropic donations to buy up or refinance coal power plants in Southeast Asia to retire them early as the region shifts to renewable energy sources.
The ETM project, first reported by Reuters last year, was developed by ADB with input from private sector firms including Prudential, Citi and Black Rock to eliminate decades of future carbon emissions by altering the economics of coal plant operations.
"The problem of legacy coal-fired power in Southeast Asia qualifies as one of the single biggest problems for the energy transition, if not the world," ADB regional vice president Ahmed M. Saeed, told Reuters in an interview.
"With this announcement, we're taking the first steps in what was an ambitious project and making it real," he added.
The coal plant deal was anounced alongside a broader country platform for energy transition in Indonesia, which depends on coal for 60% of its power. Sri Mulyani told the event that the government had identified plants generating 15 gigawatts of electricity that could be retired early.
"Fifteen gigawatts -- this is a really big size," she said, adding that it would require "significant investment."
A new "Just Energy Transition Partnership" between rich countries and Indonesia is expected to be announced at the G20 summit on Tuesday.
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