IFC backs Saratoga-led investment in power producer

Saratoga announced its involvement last December, when the first installment of $87 million was paid. The remainder - IFC's contribution - was signed off last week.

According to IFC, its participation was driven by desire to spur investment in small- and medium-sized independent power producers (IPPs) that operate on Indonesia's smaller islands, often isolated from other electricity grids. Electricity demand in the country is increasing at 9% per year and the power sector has struggled to raise capital required to keep pace with this growth.

According to state-owned utility Perusahaan Listrik Negara (PLN), Indonesia requires an additional 55,000 megawatts of power over the next decade, based on the expectation of 7% GDP growth. PLN will provide 57% of this additional capacity with IPPs responsible for the rest. IPPs currently account for 16% of Indonesia's current electricity capacity of 31,000 MW.

MPI was previously wholly owned by Medco Energi, an oil and gas exploration company. It has six gas power projects with a total gross installed capacity of 198 MW. Expanding MPI's footprint through acquisitions and greenfield projects is expected to cost about $430.5 million. This will be funded through a debt-to-equity ratio of 70:30, with $283.5 million in loans at project level and $147 million in equity, of which MPI will contribute $112 million while other equity holders in the projects put up the remaining $35 million.

This expansion will see the introduction of new small-scale hydro projects and gas-fired power projects as well as increasing the output of existing gas plant operations.

Saratoga has profited handsomely from energy sector investments in the past. Sandiaga Uno, the firm's head, previously told AVCJ that Saratoga's most iconic transaction was the purchase of a 51% stake in Adaro Energy, which is now the second-largest coal player in the country. Adaro listed on the Jakarta Stock Exchange in July 2008, raising $1.3 billion. It remains Indonesia's largest-ever IPO.

The private equity firm is expected to announce a final close on its third fund in March, hitting the hard cap of $550 million.

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• Topics
• Industrials
• Southeast Asia
• Expansion
• Indonesia
• IFC
• Saratoga Capital Group
• Growth capital
• energy