A LEADING CATALYST IN FACILITATING INDONESIAS INFRASTRUCTURE DEVELOPMENT

Role of SMI in Financing Renewable Energy Projects

Jakarta, 22 Agustus 2013

Emma Sri Martini

President Director

INDONESIA EBTKE CONEX 2013

Renewable Energy and Energy Conservation Conference & Exhibition

AGENDA
I. II. Renewable Energy sector has positive investment outlook in Indonesia What SMI role in Financing Renewable Energy Projects

AGENDA
I. Renewable Energy sector has positive investment outlook in Indonesia

The energy sector in Indonesia is dominated by four key policies and objectives as basis of clean energy regulatory framework

Diversification

A key objective of the Government of Indonesia is to reduce dependence on oil & coal by expanding the use of gas, and renewable energy resources

The Government of Indonesia recognizes that it can no longer sustain uniform pricing for electricity and petroleum products across the country, and it has begun to eliminate subsidies.

Rational Energy Pricing

Energy Sector Reform

The combination of decentralization of government decision-making to give greater involvement to regional authorities, and the need to attract capital investment in the energy sector call for energy sector reform that introduces greater transparency to planning and decision-making

The Government of Indonesia wants to bring electricity to 90 percent of the population by 2020

Rural Electrification

National energy mix strategy is supported by diversified Renewable Energy sourcing will be positive factor in Indonesia
Natural Gas 24% 2011 Oil 47% Coal 24% NRE 5%
NRE= New & Renewable Energy

National Energy Mix

Natural Gas 30%

Coal 33%

Target on 2025

Oil 20%

NRE 17%

Renewable Energy Potential in Indonesia

Energy Source Hydropower Geothermal Mini-hydropower Biomass Solar Wind Ocean

Installed capacity 4.264 MW 1.052 MW 86,1 MW 445 MW 12,1 MW 1,1 MW 0,0 MW

Resource Potential 75.760 MW 27.510 MW 500 MW 49.810 MW 4.8 kWh/m2/day 9.190 MW 35 MW

Undeveloped Potential (%) 94 96 83 99 99 100

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Source: PLN & Ministry of Energy and Mineral Resources Republic of Indonesia

...the reason why the Renewable Energy sector has strong outlook in Indonesia & what are the opportunities for investor?
Growth factors High demand new and renewable energy for national power security Investment in geothermal exploration and production The second biggest geothermal sourcing Geothermal High demand new and renewable energy for national power security Investment in biofuel Investment in biomass power production facilities Petroleum reserves is depleting Bioenergy High demand new and renewable energy for national power security Investment in hydro and micro hydro power plant The biggest power energy source potential in Indonesia Hydropower High demand new and renewable energy for national power security Investment in solar energy power source High potential in solar source Solar Energy Solar PV equipment (solar cell, battery and power storage) producer and provider Solar PV equipment service maintenance provider Solar energy for power electricity investment Hydro power plant development Equipment and service in hydro power plant Micro hydro power plant is the most popular for hydro energy source Biomass power electricity production development Biofuel plant Biofuel transportation technology Biomass energy source production (e.g waste processing plant) Biomass and biofuel tools and equipment Opportunities factors Geothermal field exploration and production activities Geothermal production service provider Geothermal power plant development

What does Government support Renewable Energy investment in Indonesia?

No Regulation Description

Law No. 30/2007 on Energy

Provision and utilization of new & renewable energy should be increased by the government and local government in accordance to their authorities. Provision and utilization of new renewable energy can get incentives from government/local government for certain period until it reaches economical development stage. Putting priority to utilize locally available energy resources for electricity generation. Process of procurement is implemented through direct selection ( without tender).

Law No. 30/2009 on Electricity

Law No. 27/2003 on Geothermal

To regulate the management and development of geothermal energy sources for direct and indirect utilization. State owned (PT PLN) has the obligation to purchase electricity from small-medium scale RE power plant which is developed by cooperatives, community or business Entities PT PLN is allowed to purchase electricity higher than the above mentioned price based on PLNs Own Estimation (OE) price and has to be approved by the Minister of Energy and Mineral Resources

Minister Regulation No.31/2009 on Small and Medium Scale Power Generation using Renewable Energy

Minister of Finance Regulation No. 21/PMK.011/2010 and 24/PMK.011/2010 on Renewable Energy Incentives

Tax facility for renewable energy in the form of Income Tax, Import Duty, Tax Holiday, and Tax Exemption etc.

Source: Ministry of Energy and Mineral Resources Republic of Indonesia

Case study: Mini-hydro Power Plant Investment in Indonesia & its issues
Low Low to Medium Medium Medium to High High
Proven Offtaker* Certain/Regulated Pricing (<10 MW) Simple procurement Included in sponsor Convensional management Not many banks or other financial institutions are interested in providing financing to small hydro projects power

Limited equity Limited flexibility of financing

Sponsor

Operator

Bank

Offtaker : PT Perusahaan Listrik Negara (PLN)

Mini Hydro Power Plant

Government

Licensing Land (Acquisition, or Usage Permission of Forestry)

Water Supply

Machine Supplier

Contractor

Project Preparation Consultant

Sustainability issues of water discharge level Catchment area Difficult to access location

Simple technology Low maintenance

Lower middle Unproven project management capabilities Lack of ability to handle cost overruns case

Small and medium class Less comprehensive feasibility study (probability of cost overruns and design changes)

Overall, the key drivers and restraints of the Renewable Energy investment in Indonesia
High power demand and low electrification ratio

High

Market Drivers

Abundance of new energy and RE potential resources

Rational tariff for commercially investment

Indonesian high economic and industry growth

National energy policy (energy mix) & incentives

Low

Low

Market restraints

Investment issue and subsidy scheme Lack of infrastructure High Land acquisition issues and long chain of bureaucracy

Limited information and awareness

Need for more expertise

AGENDA
II. What SMI role in Financing Renewable Energy Projects

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Whats PT Sarana Multi Infrastructure (Persero)?

PT Sarana Multi Infrastruktur (Persero) (SMI) was established Commercial Financing on February 26, 2009 Complementary to with a purpose to banks Syndication Loan or become a catalyst for club deal accelerating arrangement infrastructure development in Indonesia
Scope of Services Advisory Financial Advisory Services Investment Advisory Services Transaction Advisory Services Training & Capacity Building Project Preparation (PDF) Project Development Financing Advisory to contracting/ tendering agencies Limited capacity building

SMI Shareholding Structure Government Of Indonesia through Ministry of Finance

Ownership: 100%

Eligible Infrastucture Sectors (Ministry of Finance Reg. No. 100/2009)

Electricity Water Supply Transportation

Irrigation & Waterway Toll Road & Bridges Oil & Gas Waste Water & Waste Management

Third Parties Government/ SOE Private/ Bank Bilateral/ Multilateral Institutions JV JV PT IIF Telecommunication

Financing Product
Shareholder: SMI, ADB, IFC , DEG, SMBC

Refinancing Take Out Financing Working Capitan Loan Senior Term Loan Equity

Promotor Funding Bridge Loan Mezzanine Subordinated Loan

Investment in Infrastructure Projects

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SMI financing commitment trend overtime

Total Project Cost has been financed are IDR 27 Trilion and creating Multiplier Effect of 10,2 times
30000 8.001 25000 20000 15000 1.158 10000 5000 376 0 2009 2010 2011 2012 30-Jun-13 Total Project Cost 3.952 2009 2010 2011 2012 16-Agust-13 400 49 125 175 515 1.196 15.302 1.689 27.044

Financing performance, 2009- 16 Agustus 2013

Outstanding Komitmen
(IDR Billion)

2.737

2.221

2.079

1.287

Total Mini Hydros Project Costs have been funded are IDR 3.952 Billion

31% of total commitment financed the Minihydro Projects ( IDR 823 billion)
69%

31%

823

Mini Hydro's Commitment

Mini Hydro's Commitment (SMI's Portion) Mini Hydro's Project Cost

Others Sector Commitment

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Distibution of SMI Renewable Energy Projects: Mini-hydro power plants

PLTMH Asahan, North Sumatera

PLTMH Tara Bintang, North Sumatera

PLTMH Mobuya, North Sulawesi

PLTMH Humbahas, North Sumatera

PLTMH Solok Selatan, West Sumatera

PLTMH Lebong, Bengkulu

PLTMH Lebak, Banten

PLTMH Banjarnegara Central Java

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Case study: financing structure on Mini-hydro power plants

Senior Loan

SMI

Intl Institution SMI

Senior Loan

Aset

Mezzanine

Private Equity overseas

PE overseas SMI

Mezzanine

Asset

Equity

Project Sponsor

Project Sponsor

Equity

Project Finance: Mini-hydro Power Plant SMI as Senior Lender PE overseas as co-financier on Mezzanine Loan

Project Finance: Mini-hydro Power Plant SMI and International Institution (Co-financier) as Senior Lender On the next stage: PE overseas & SMI as Mezzanine Lender

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Appendix 1: SMIs On Going Project Preparation

The Umbulan Water Supply project is a water supply project that utilizes Umbulan Spring. The objective is to distribute 4.000 liter/second of bulk water from Umbulan spring to Pasuruan, Sidoarjo, Surabaya and Gresik (East Java) through the development of pumping system and a 96,7 km transmission system. Status: tender process Estimated project cost: + USD 210 mio

The SHIA Railway PPP project aims to provide a railway transportation facility connecting Halim and Soekarno Hatta Airport. It is dedicated to be an express rail with premium service, targeted at air passengers.

PPP Batam MSWM Project aims to give solution in handling the issue of solid waste in City of Batam, as an implication of population growth and industrial centralization in Batam Island.

Status: preparing Pre-FS Estimated project cost: + USD 2 bn

Status : Final Business Case Estimated project cost: + IDR 1-1,5 Tr

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Appendix 2: SMI cooperations in developing Indonesia infrastructure

Co-Financing Project Preparation

Industrial Decisions Inc (IDI)

ANZ Panin Bank

As a Mezzanine Investor of Lubuk Gadang Mini Hydro Power Plan

As a cofinance partner of LPG terminal project at Semarang Port, Central Java

BCA (MLA), BCA, Bank DKI, ICBC, Panin & BJB (LU)

CDIA

TA ADB - Bappenas

Financing Syndication for construction CilkampekPalimanan Toll Road

Mode of transportation developmnet cooperation in Surabaya & partner for GCA

Providing assistance for Municipal Solid Waste Management Project in Batam with ADBBappenas

Capacity Building cooperation and project preparation assistance for PPP

Singapore Cooperation Enterprise

Maybank Shariah

UOB Bank

Standard Chartered Bank

BP Batam

InfraCo Asia

Kalimantan Railways Pte.

As a cofinance partner of FSO(Floating Storage Offloading) terminal project in Natuna Island, Riau Islands

As a cofinance partner of Mini Hydro Power Plant Project in Bengkulu

As a cofinance partner of power plant & FPSO (Floating Production & Storage Offloading) project

Accelerating infrastructure development cooperation in trading area & Batam Bintan Karimun (BBK) port

Scooping cooperation for preparing PPP Projects in Indonesia

Cooperation of coal railway construction in East Kalimantan

Capital Market/ Infra Fund Management/ Other Cooperation

IDX

IFC

Establishing SMI Infra18 index consisting of 18 infrastructure stocks

Study of the development of infrastructure financing instruments through longterm capital market

JBIC

MCA Indonesia

Bank of Tokyo Mitsubishi UFJ

Financing of Green Infrastructure Program

Infrastructure Financing for Green Prosperity Programme

Capacity building cooperation and project infrastructure financing

Capacity building cooperation and sharing knowledge & information

PPP Development Center Russia

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THANK YOU FOR YOUR KIND ATTENTION

Disclaimer All information presented were taken from multiple sources and considered as true by the time they were written to the knowledge of PT Sarana Multi Infrastruktur (Persero). PT Sarana Multi Infrastruktur (Persero) can not be held responsible from any inacuracy contained in the material. PT SMI follows all internal and external guidelines and regulations that govern the evaluation process on determining the financing feasibility of an infrastructure project. Every decision to finance or not to finance a project is therefore based on a responsible and thorough due diligence process. Any complaint in the process of financing irregularities can be submitted to: Ms. Astried Swastika Corporate Secretary PT SMI Tel : +62 21 5785 1499 Fax : +62 21 5785 4298 Email : corporatesecretary@ptsmi.co.id Public complaints on PT SMI service will be kept strictly confidential and handled by a special committee to ensure that complaints are addressed appropriately.

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