Jakarta – Environmental activists regret that BNI is still funding a 1.1 Gigawatt coal-fired power plant project that will be used to supply electricity to Adaro’s aluminium smelter in North Kalimantan’s “Green” Industrial Zone (Kaltara).
350.org Indonesia campaigner Suriadi Darmoko believes the decision shows a setback in the state-owned bank’s sustainable funding efforts. In fact, the International Energy Agency stated that to achieve net zero emission by 2050, there should be no new coal-fired power plants since 2021, in order to limit the rate of increase in the earth’s temperature below 1.5 degrees Celsius.
“In September last year, BNI had no plans to expand into the coal sector. We consider the decision to fund this dirty project a huge setback for sustainability funding,” Darmoko said in a written statement.
According to him, the contribution of one of the State-Owned Bank Association (Himbara) banks in funding to Adaro has increased by 714% since 2021. The bank is one of five banks that are members of the loan syndication for Adaro’s project. The other four banks, based on data tracing by the environmental group research team, are Bank Mandiri (BMRI), Bank Central Asia (BCA), Bank Rakyat Indonesia (BBRI), and Bank Permata (BNLI). Based on the research, BNI contributed USD 350 million to Adaro’s new smelter and coal-fired power plant projects.
Any funding into coal assets has transition risk and stranded asset risk driven by the policy shift away from coal. Studies by the Centre of Economic and Law Studies (CELIOS) show that the construction of coal-fired power plants is detrimental to investors including creditors and bondholders.
“The cost of borrowing capital for coal-fired power plant assets is currently relatively expensive compared to other industries, because the risk of coal-related assets can decrease in value in line with fluctuations in coal prices, changes in export destination country policies, and is considered not in line with energy transition efforts. BNI’s decision to support this new PLTU project is a high-risk decision for banks as well as BNI’s own reputation,” explained Bhima Yudhistira, Executive Director and Economist of CELIOS.
The world is increasingly moving away from coal. The IEA NZE 2050 scenario states that coal supply will drop by 48% during 2021-2030 and 91% during 2021-2050. Moreover, Indonesia has committed to shutting down all coal-fired power plants by 2050.
“Global trends show that depositors and institutional investors, including bondholders, tend to move funds to banks that are further away from financing portfolios to coal-fired power plants. Moreover, there is a JETP (Just Energy Transition Partnership) funding commitment which is ideally in line with the closure of coal-fired power plants. It is rather strange if banks are still trapped in the PLTU funding pattern when the government has committed to the closure of PLTU. This means there is something out of sync between orders from the centre and state-owned banks that should help the government encourage a sustainable economy,” added Yudhistira. (Hartatik)