Investors Environmentally-Conscious, Will It be the End of Coal Plant?

Indonesia’s giant coal mining companies are pivoting to coal gasification projects as global coal markets and investors become increasingly conscious about the environment. As quoted by Nikkei Asia, coal gasification can produce several fuel products with lower emissions, which is an important consideration for investors who are increasingly concerned about environmental, social, and corporate governance (ESG) issues.

The state-owned coal mining company, PT Tambang Batubara Bukit Asam Tbk (PTBA), announced a partnership with PT Pertamina (Persero) and a US-based chemical producer, Air Products, in December on a US$2.1 billion project to convert coal into dimethyl ether (DME). PTBA will start the coal-to-DME plant construction near its mine in Tanjung Enim, South Sumatra, in the middle of this year.

Investors are increasingly concerned about environmental issues. Finance companies in Japan, South Korea, and Europe are no longer interested in lending billions of dollars to fund coal-fired power plants (PLTU), including in Indonesia. As quoted by The Diplomat, financing companies such as the Japan Bank of International Cooperation (JBIC) would not fund any coal plant project anymore; despite the Japanese and South Korean contributions in the coal plant industry in Southeast Asia were very huge. In the first term of President Joko Widodo's administration, there were at least four major financing agreements worth US$12.3 billion with JBIC to develop coal-fired power plants with a total capacity of 6,760 MW.