Investor Presentaiton

RENEWABLES FINANCE IPPs: finance is not the main issue, business process is Our survey with IPPs reveals that finance is not the primary issue for the renewables projects in Indonesia. Instead, the unclear, inconsistent business processes are seen as the core problem that prevent the projects from getting finance. One developer provided an example of how tariffs for geothermal energy can be uncertain. Under MEMR Reg. No. 50/2017 tariffs for geothermal-based electricity are capped at 100% BPP but recently PLN was circulating a new rule that caps tariffs for geothermal-based electricity at 85% BPP. The inconsistency between PLN and government rules raises questions and confusion among project developers and investors. The frequent regulatory changes happened in the past two years also sent negative signal to the market. The decision to use BOOT scheme and change in risk allocation, for instances, have directly affected the business process of renewables projects in the country. The uncertainty has discouraged lenders to invest in renewables projects. Another example comes from waste to energy (wte) industry, where the government recently released Presidential Regulation (PR) No. 35/2018 on the acceleration of development of wte projects. Under this regulation, twelve cities will enjoy a new single Feed-in-Tariff (FIT) for wte projects developed in those cities. A tariff at 13.35 cents USD/kWh will be given to projects of up to 20 MW, while for projects bigger than 20 MW will obtain 14.54 - (0.076 x capacity) cents USD/kWh. Considering that PR has a higher rank than MEMR Regulation, PLN has to follow the Regulation 35/2018. In practice, however, PLN insists to pay developers according to MEMR Regulation No. 50/2017 (which generally provides lower tariffs than Regulation 35). This has caused a tough negotiation between PLN and wte developers, lengthening the PPA process and increasing uncertainty in business process. IESR (Institute for Essential Services Reform) | www.iesr.or.id 25

View entire presentation