Medco Power 2011 The proposed IFC transaction is an equity investment of up to $25 million in PT Medco Power Indonesia (MPI or the Company), an independent power producer (IPP) in Indonesia (Medco Power 2011 or the Project or the Investment). The Investment is part of a $112 million equity package to be arranged by a consortium of financial investors to acquire majority of MPI and provide growth capital to MPI.  MPI is currently owned 100% by PT Medco Energi Internasional tbk (MedcoEnergi), an oil and gas exploration company in Indonesia.  In line with MedcoEnergis strategic re-focusing on its hydrocarbon business, MedcoEnergi has decided to invite a financial investor into MPI to facilitate its further growth in the domestic IPP market, which is poised for significant growth in response to growing electricity demand in the country.  The power grids in Indonesia comprise a large, interconnected Java-Bali grid and several other smaller island grids, most of which are isolated.  Given growth in electricity demand of over 9% per annum, the Indonesian power sector has struggled to meet its required investment needs over the past decade. In light of these factors, MPI has focused on developing, owning and operating small- to medium-scale IPPs tailored to smaller islands and isolated grids with unmet demand for electricity. MPI has developed six gas power projects with a total gross installed capacity of 189MW. MPI also provides Engineering, Procurement and Construction (EPC) and Operations and Maintenance (O&M) services to other power producers in the country.   Given the increasing awareness of the climate change agenda in the country, MPIs future strategy is to pursue small- to medium-IPPs in the clean energy sphere. The growth capital provided by IFC and its co-investors is to be used for: i) the expansion of MPIs existing gas plants from simple-cycle to combined-cycle, thereby improving their efficiency; ii) developing small scale hydro projects; and iii) new gas fired power projects. The Project is expected to have the following developmental impacts:  a) Climate Change Mitigation: The Project is expected to displace coal and oil fired power generation that would otherwise be developed and to have demonstration effect in facilitating the development of small-to medium -sized domestic IPPs using domestic gas or hydro resources, a market segment that has been under-served thus far.   b) Private Sector Development: The Project would also have a demonstration effect in facilitating the development of local IPP players, in a market that remains dominated by foreign IPP investors. The development of local players is important in supporting the growth of a competitive IPP market and would further broaden the local private-sector base.  c) Infrastructure Development: The Project is expected to add power generating capacity for over one million people, a substantial number in a country where approximately 1/3 of the population lives without regular access to the electricity network.  d) Rural Development & Employment: Investments in small scale hydropower projects are expected to stimulate job creation and economic growth in rural communities.  e) Taxes: The project is expected to increase the tax base of the Government of Indonesia.