The encyclopedia · Finance & Accounting · Financial decision · 2015–2020
ADB paid PLN's Sumatra grid for results—customers, lines, feeders—not inputs
ADB's first energy results-based loan paid PLN only for verified outcomes; Sumatra hit 14.54M customers by mid-2019.
Perusahaan Listrik Negara (PLN)
The solution
Sumatra's grid had about 6,000 MW of installed capacity in 2013 yet ran an average 250 MW deficit, and PLN faced an estimated US$10.8 billion in grid investments it could not finance alone. A conventional loan would have funded and audited hundreds of small contracts—slow, costly, and remote from outcomes.
In 2015 ADB approved US$600 million (US$575 million from ADB, US$25 million from the ASEAN Infrastructure Fund) as its first results-based loan in the energy sector, with the World Bank adding US$500 million in parallel program-for-results financing. Disbursement was tied to six disbursement-linked indicators covering customers, energy sales, feeder interruptions, reconductored transmission lines, transformers and medium-voltage lines.
By 30 June 2019 Sumatra had 14.54 million PLN customers, 2,437.64 circuit-km of reconductored transmission lines, 3,226 new transformers and 2,817.26 circuit-km of medium-voltage lines. Most indicators were met; only residential energy sales growth missed, because customers were conserving energy.
Because payments followed verified results through PLN's own systems, the utility kept its procurement and adapted quickly, while ADB focused on aggregate outcomes and institutional strengthening through 26 program action plans. At midterm, both sides raised the targets—the mechanism's feedback loop working as designed.
Why it worked
- Output-based disbursement fit small, dispersed grid works that would drown an input-based lender in contract audits.
- Using PLN's own systems cut transaction costs and strengthened the institution instead of bypassing it.
- Six shared indicators aligned ADB, PLN and the World Bank around one results framework.
- Verification created a feedback loop: conservative targets were found and raised at midterm.
What can be applied
When work is many small scattered pieces, funding outcomes beats funding inputs: the borrower keeps its own procurement, the lender verifies results, and transaction costs fall for both.
Aftermath
The program was part of a larger ADB package for Indonesia's grid, with follow-on lending planned for Java-Bali and Eastern Indonesia. Its model—disbursing against verified outcomes through the borrower's systems—became a template for ADB results-based operations in energy and beyond.
Sources
- Lessons from Using Results-Based Financing to Upgrade a Power Grid
- Electricity Grid Strengthening—Sumatra Program
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