A new World Bank program will help Indonesia meet its growing energy needs and support economic growth, by bringing electricity to three million people in Sumatra island, an important economic hub for the Southeast Asian country.
The Power Distribution Development Program for Results– a US$500 million loan to PT PLN, the national power utility – would boost the island’s electrification ratio to 90 percent, as well as improve power systems to be more efficient and reliable.
“Lack of electricity access to millions of people in Sumatra constrains the region’s economic potential, and the Power Distribution Development Program will help close the infrastructure gap that prevents Indonesia from achieving higher growth,” said World Bank Country Director for Indonesia Rodrigo Chaves. “Electrification improves economic productivity as well as health and education outcomes, particularly for the poor and near poor,” Chaves added.
About 39 million Indonesians lack access to electricity, and 9 million of the unconnected live in Sumatra.
Complementing existing power generation investments on the island, the program will support the expansion of the distribution network, including more than 40,000 circuit kilometers of distribution lines and some 28,300 transformer units.
“Power distribution lines and substations will be built, rehabilitated or upgraded, and customer outage management improved in order to reduce the frequency and duration of service interruptions. Improving the quality and reliability of service delivery will help customers increase their productivity and competitiveness,” said Dhruva Sahai, World Bank Senior Financial Analyst and one of the Program’s team leaders.
The program also includes building institutional capacity in PT PLN for program planning, budgeting, procurement, financial management, and monitoring and evaluation.
“This is the World Bank’s first foray in Indonesia with results-based lending. The program can be an example of how to improve the effectiveness and efficiency of their spending in order to achieve better results,” said Joel Maweni, World Bank Energy Adviser and also a Program team leader.
The assessment of PT PLN’s technical, fiduciary, and safeguards systems for Program delivery was partly funded through grant financing from the Asia Sustainable and Alternative Energy Program.