The deal, announced during the COP28 climate talks in Dubai on Sunday, is the first under the ADB's Energy Transition Mechanism (ETM) programme, which aims to help countries cut their climate-damaging carbon emissions.
Supporting a $20 billion Just Energy Transition Partnership agreed last year that aims to bring forward the sector's peak emissions date to 2030, the ADB hopes to replicate it across other countries in the region.
"If we don't address these coal plants, we're not going to meet our climate goals," David Elzinga, ETM team leader, said on the sidelines of the conference.
"By doing this pilot transaction, we are learning what it takes to make this happen," Elzinga said. "We're very much shaping this as something we want to take to other countries."
ADB also has active ETM programmes in Kazakhstan, Pakistan, the Philippines, and Vietnam, and is considering transactions in two other countries, it said.
Under the non-binding framework deal, signed by ADB, Indonesian state-owned power utility company PT PLN, independent power producer PT Cirebon Electric Power (CEP) and the Indonesia Investment Authority (INA), a power purchase agreement for the 660 megawatt plant - a key supplier to the capital Jakarta - will be ended in December 2035 instead of a planned date of July 2042.
As it only opened in 2012, the plant, operated by CEP, could have been expected to run for 40 or more years, so retiring it in 2035 would avoid over 15 years of greenhouse gas emissions from the site, the ADB said.
The deal is subject to due diligence, including assessing its impact on the environment, the company's workers and society more broadly, and the broader electricity system, but is expected to close in the first half of 2024.
