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Investor Presentaiton

REGULATION MEMR Reg No.50/2017: Lower tariffs for renewables After the issuance of MEMR Reg. No. 12/2017, the renewables tariffs were started to be capped at 85% of PLN generation cost (BPP). Under the MEMR Reg. No. 50/2017, when local BPP is higher than national BPP, geothermal and WTE power plants will get tariffs at maximum 100% of local BPP while the other renewables will be 85% of local BPP. Meanwhile, when local BPP is lower than national BPP, tariffs will be based on business-to-business agreement. The Regulation 50 provides lower tariffs for renewables compared to previous regulations where the FIT scheme was used. Issued by the end of 2017, the regulation has been seen as one of main factors that negatively impacts the bankability of renewables projects in Indonesia. Low tariff in Java-Bali grid The low BPP makes renewables development in Java-Bali unattractive. The slow renewables development in these regions will likely cause the country miss its renewables target, as 80% of electricity demand in Indonesia is in Java-Bali. BOOT scheme for all renewables MEMR Reg No. 10/2017 introduced BOOT scheme for geothermal, large hydro, and biomass power plants. MEMR Reg No. 50/2017 requires all types of renewables to follow the BOOT scheme. With the BOOT scheme, the power plant assets cannot be used as collateral. The small IPPs then face difficulties to get financing because they do not have assets that can be used as collateral. BPP does not reflect the true cost of generation It is unclear how PLN calculates the BPP. For example, several power plants were funded by grants, which reduce significantly the generation cost of the power plant. The coal price cap introduced in early 2018 (MEMR Decree 1395K/30/MEM/2018) will also push down the BPP and put renewables at a disadvantage. IESR (Institute for Essential Services Reform) | www.iesr.or.id 21
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