PT PENJAMINAN INFRASTRUKTUR INDONESIA (PERSERO)Selaku BUPI - Pelaksana Mekanisme Single Window Penjaminan Infrastruktur

How Can We Make 35,000 Megawatts ‘Green’?Indonesia Green Infrastructure SummitSinthya Roesly, CEO

Jakarta – June 9, 2015

BACKG

ROU

ND

GoI is embarking on a major 35,000MW program to keep up with the growing electricity demand in Indonesia

Approximately 60 percent will be using coal fired technology and the rest includes among others renewable energy

There are growing concerns on how to manage the environmental impact of the power generation scale up program

IIGF is actively involved in infrastructure public private partnership projects, and have methods to ensure the incorporation of environmental sustanability perspective in the project it supports

Guarantee for Infrastructure PPP Projects

Contribution to Environmental Sustainability

35000MW

Coal

Non-CoalGuarantee Support for

Renewable Energy Projects

Environmental Risk Mitigation

Plan

Establishment 30 December 2009

Ownership

Legal Basis

100% Goverment of Indonesia

• Presidential Regulation (Perpres) no.38/2015• Presidential Regulation No.67/2005, j.o. No.13/2010, No. 56/2011 and No 66

/2013• Presidential Regulation No. 78 tahun 2010• Minister of Finance Regulation (PMK) No. 260/PMK.011/2010• Goverment Regulation No. 35 tahun 2009• Goverment Regulation No. 88 tahun 2010• Goverment Regulation No. 55/2011• Goverment Regulation No. 68/2012

To provide guarantees to private sector on the performance of Government Contracting Agencies’ financial obligations set out in PPP Agreement for infrastructure projects

Mandate

3

Indonesia Infrastructure Guarantee Fund

• To manage government infrastructure guarantee on PPP model (under Ministry of Finance)

• Authorized Capital IDR9 trillion (~USD 1 billion) (Paid in Capital as per 2015 State Budget + IDR 7 trillion)

IIGF PRO

FILE AND

BUSIN

ESS MO

DEL

Guarantee Structure

• Financial obligations of Government Contracting Agency which are quantifiable or has a clear compensation amount formula stipulated in the PPP Agreement.

• Examples: delay in obtaining permit/license, change in law/regulations, breach of periodical tariff adjustment, breach of contract (default), minimum patronage, etc.

Possible Risk Coverage of Infrastructure Guarantee

* Recourse means the right of Guarantor to claim back to GCA upon every payment made against valid claim from the guaranteed party (Project Company ).

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IIGF G

UARAN

TEE STRUCTU

RE

1. IMPROVING CREDITWORTHINESS OF PPP PROJECTSManaging the provision of government guarantee to improve creditworthiness

of infrastructure PPP projects

2. RISK ADVISORY TO GOVERNMENTProviding advise to the government on risk allocation and mitigation in

infrastructure PPP projects

3. CAPACITY BUILDING BY IIGF INSTITUTEIIGF Institute is IIGF’s contribution to support the betterment of Indonesia’s infrastructure sector through workshops, capacity buildings and research.

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ADD

ED VALU

E OF IIG

F’S OPERATIO

NS

GUARANTEE GOVERNMENT’S PERFORMANCE AS

CONTRACTING AGENCY TO THE PRIVATE SECTOR

Benefit of the Guarantee

ENHANCE TRUST FROM INVESTORS & LENDERS

IMPROVE SUCCESS IN FINANCING, INCLUDING

POTENTIAL ENHANCEMENT OF TENOR, INTEREST OR

FINANCING CONDITIONS

GCA

Private Sector

1. To determine the specification and standard level of services.

2. Financial Obligation (based on the PPP Agreement)

Responsible for Financing, Design, Construction, and Operation

IIGF Guarantee is to Ensure Private Sector on the Fulfillment of GCA

Financial Obligations, without shifting the responsibility away from GCA 6

ADD

ED VALU

E OF G

UARAN

TEE

7

IIGF has relatively strict guarantee assessment process

PPP Agreement

Project Evaluation

Regulatory Compliance

Pre-FS

Arbitration Clause

Risk allocation

Competitiveness

Project viability

CA com

mitm

ent

• IIGF will appraise project feasibility on technical, financial, economic, social, environmental

• Proper and reasonable risk allocation

• Competitive tender process

Appraisal to ensure bankability and fairness of risk allocation

Developed with assistance of

credible advisors/experts

Binding arbitration clause in PPP Agreement

Vario

us a

spec

ts to

be

asse

ssed

APPRAISAL FUN

CTION

OF IIG

F

8

Environmental Perspective in IIGF

• Environmental and social desirability is one of the appraisal criteria in IIGF

• Environmental and social impact must also be seen from a risk perspective:• AMDAL or ESIA should not just be about compliance!

• AMDAL or ESIA should fulfill sufficient level of analysis and baseline information to identify potential risk and determine mitigation measures

• Environmental risk mitigation is a whole-of-life effort, beginning from appraisal stage, and continuously managed or monitored during project operations through project monitoring

• Projects with desirable environmental and social impact will likely obtain public support in the long term On the contrary, project with adverse social and environmental impact will trigger public rejection

ENVIRO

NM

ENTAL R

ISK PERSPECTIVE Environment Issues

Power Plant (Coal)

• Water consumption for cooling• Dust emission from chimney• Temperature of waste water• Waste to water from coal stockpiles• Groundwater contamination from landfill• Radiation from High Voltage Overhead Transmission

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IIGF Potential Support to Renewable EnergyR

ENEW

ABLE ENERG

Y• Credit enhancement

of Contracting Agency performance risk

• Assistance to Contracting Agency in underwriting interactions

• Capacity Building for Line Ministries & Local Governments

• Licensing Risk (i.e. Geothermal license vs PPA)

PPA creditworthi

nessCA

Assistance

IIGF Institute

Risk Mitigation

Hydro Power Biomass Power Geothermal

Notes on Green Infrastructure PPPN

OTES O

N GREEN IN

FRASTRUCTU

RE PPP

Pre-requisite for PPP

• Healthy Competition• Financial Viability• Social Acceptability• Presence of Local Competent

Developers (as partner for foreign investors

Green Infra Challenges

• Limited technology provider• Higher technical risk• Greater Cost of Service

Technologies to mitigate environmental risk may result in higher upfront cost, while true cost of dealing with environmental impact may often get understated bidding process can deal with this issue

Other important agenda to address the challenges: Fiscal support mechanism Public and private risk allocation framework Supporting regulatory framework Domestic capacity development roadmap Improvement of PPP procurement process including standard for

technology and documentations

PROJECTS WHICH HAVE COMPLETED IIGF’S GUARANTEE PROCESSGuarantee for power sector : 1) Batang Coal Fired Power Plant 2x1000MW + Rp.40

trilyun; 2) Sumsel 9 & 10 Minemouth Power Plant 3 x 600MW + Rp.45 trilyun; 4) Toll Road: Ps Koja-Soreang

PROJECTS CURRENTLY UNDER IIGF’S GUARANTEE PROCESS*1) Clean Water: Lampung, Umbulan & West Semarang; 2) Railway: Halim-

Soekarno Hatta Express Rail

INTERNATIONAL STRATEGIC PARTNERSHIP1) Financing: World Bank; 2) Cooperation: Multilateral Investment Guarantee

Agency (MIGA), OPIC USA, China EXIM, etc

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* Projects under process still awaits progress from the respective project’s responsible agency with respect to their project preparation or transaction, including also the obtaining of government support.

WH

ERE WE ARE N

OW

WRAP U

PConclusions

• IIGF incorporates environmental risk mitigation in the heart of its operations with the belief that sustainable environment is inseparable from project continued success

• While coal is not renewable energy, in 60% of the 35,000MW scale up program, environmental risk mitigation can still be pursued

• IIGF also supports renewable energy through the provision of guarantee, and the associated support it provides to the improvement of the project