Major banks aim to phase out coal in Indonesia

The deal involves financing the accelerated closure of the Cirebon-1 coal-fired power station in West Java.

Mitsubishi UFJ Financial Group Inc is also in discussions about participating. The Asian Development Bank (ADB) has been leading discussions, and momentum has been building over the past few months.

The plan involves converting a portion of the plant's equity into debt to fund a one-time dividend for investors. This initiative aims to blend private capital with public financing under multilateral climate aid packages, known as Just Energy Transition Partnerships (JETPs).

While there have been challenges in blending private and public financing, there is growing interest from international banks. Closing Cirebon early would be the second market-based deal to retire a coal plant ahead of schedule in an emerging market and the first to involve international financial institutions.

This initiative aligns with global efforts to phase out coal-fired power plants to mitigate climate change.