The Export-Import Bank of Korea (Korea Eximbank) announced on the 3rd that it will exclusively provide USD 131M in project financing to the Wampu Hydroelectric Generator Construction Project in Indonesia, a project jointly participated by Korea Midland Power Co., Ltd. (KOMIPO) and POSCO Engineering Co. Ltd.

Korea Eximbank is the first Korean financial institution to exclusively provide PF for an overseas project.

The bank’s decision to do so was based on years of accumulated expertise in financing various overseas projects and the need to support Korean firms entering overseas “green industries” (industries that promote sustainable growth and low carbon emissions) as a policy financial institution.

The 45MW micro-hydroelectric power generator costing US$174M will be built in the Wampu region of Northern Sumatra and will be the first independent hydroelectric power generator project in Indonesia. For thirty years after its construction, the generator will be operated by PT. Wampu Electric Power, a project company in which Korean companies have key roles.

The Wampu project is an overseas CDM* project, capable of securing 230,000 tons of Certified Emission Reductions (CER) per year. As such, the Green Pioneer Program (GPP), established in April 2011 to assist Korean companies participate in overseas green projects, has been applied.

*Clean Development Mechanism (CDM): a mechanism jointly implemented by developed and developing countries to reduce emissions of greenhouse gases and mitigate global warming. The CDM is governed by the United Nations Framework Conventionon Climate Change (UNFCCC) as a means of decreasing greenhouse gas emission.

Overseas PFs entail risks of local political instability, complicated contract structure, and varied interests of multiple stakeholders. Thus, they are rarely financed by a single institution and are generally financed through a syndicate loan from a consortium of financial institutions.

However, despite the relative feasibility and business value of small scale renewable energy projects, such projects frequently encounter difficulties as lenders are limited in participating in projects of certain sizes.

Korea Eximbank’s decision to exclusively participate in the PF is expected to have positive effects on prospects of similar projects, by resolving the greatest obstacle in small-scale overseas renewable energy projects ？ procurement of funds.

A representative of Korea Eximbank commented, “Korean companies are latecomers when compared to their peers in other nations and lack a track record in overseas projects. It is therefore important that policy banks provide financial services to those firms. Korean renewables industry should exploit the stagnant investment sentiment in competitor nations and develop their potential through active investment, as Korea’s shipbuilding industry has done in the past.”