EXIM OFFICIALS SEEK OPPORTUNITIES TO EXPAND PARTICIPATION

UNCLAS JAKARTA 001941 SIPDIS SENSITIVE STATE FOR EAP/MTS STATE ALSO FOR EEB/ESC/IEC/ENR, S/CIEA, AND EEB/IFD ENERGY FOR PI-32 CUTLER COMMERCE FOR 4430 NADJMI AND 6930 TREASURY FOR T RAND AND G RAO STATE PASS TO USTR EHLERS AND WEISEL STATE PASS TO EXIM E.O. 12958: N/A TAGS: ECON EFIN ENRG EPET EINV ID SUBJECT: EXIM OFFICIALS SEEK OPPORTUNITIES TO EXPAND PARTICIPATION IN INDONESIA ¶1. (SBU) During a recent visit to Indonesia, Member of the Board of Directors of the U.S. Export-Import Bank Diane Farrell and Vice President Ray Ellis met with bank executives to explore the possibility of establishing a credit facility. ExIm also met U.S. and Indonesian business executives Indonesian government officials to seek opportunities for expanded participation in the Indonesian power and infrastructure sectors. Credit Facility Garners Interest -------------- ¶2. (SBU) Senior officials from five domestic Indonesian banks - Mandiri, BCA, BNI, Danamon, and the Indonesia ExImbank - expressed interest in participating in a credit facility with ExIm. Under this facility, the participating domestic bank will vet local projects and act as a domestic lender or guarantor. ExIm will then provide a guarantee to an international lending bank, which will provide financing for the project through the domestic bank. This arrangement will facilitate ExIm participation by reducing the country risk premiums required on non-sovereign loans by Footnote 4 of ExIm's Country Limitation Schedule. Farrell and Ellis also met with Citibank to discuss the credit facility, although that bank is unlikely to participate as a local lender. Citibank can play a role as one of the guaranteed lenders. ¶3. (SBU) All five Indonesian banks expressed a desire for new lending opportunities, because they all currently have a surplus of cash. Sebastian Paredes, the President Director of Danamon Bank, stated that Indonesian banks' response to the financial crisis a year ago was to increase cash reserves. However, he said the resulting surplus of cash was not an optimum situation, either. ExIm and Electricity Development -------------- ¶4. (SBU) ExIm also seeks to support U.S. participation in Indonesia's power sector development. Indonesia plans to add an additional 10,000 MW of power generation capacity, including about 3,600 MW of geothermal power, much of it through independent power producers. ExIm participation in the sector has so far been hampered by the lack of sovereign guarantees for PLN, the state-owned electricity monopoly. Director of Geothermal Sugiharto Harsoprayitno and PLN Chairman Alhilal Hamdi stated that the Presidential decree that will authorize the new 10,000 MW plan will include an explicit government guarantee for the electricity offtake contracts. Farrell stated that, depending on how the guarantee is worded, ExIm may be able to consider it a sovereign guarantee and offer support for these projects. ¶5. (U) Ray Ellis has cleared on this cable. HUME