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Exclusive: $1.3bn in co-financing for Indonesian renewables

Four DFIs and the Japanese government are mulling loans to the sector, part of a $5bn wall of liquidity expected to enter the country’s energy space by 2020.

The Asian Development Bank (ADB) earlier this month approved a loan of $500 million, including $100 million from the ADB-administered ASEAN Infrastructure Fund, to help stimulate Indonesia’s energy industry, support reforms and improve overall governance in the sector. 

It has now emerged that the ADB loan will be complemented by about $800 million in potential co-financing from key development partners. 

An ADB spokesperson told Infrastructure Investor it has been in close consultation with other development finance institutions (DFIs) including the World Bank, KfW Development Bank (KfW) and Agence Française de Développement (AFD) to discuss their participation to the programme. The government of Japan is also said to be considering the co-financing proposal.

The World Bank, KfW and AFD are to respectively contribute $500 million, $200 million and $113 million, according to an ADB project document seen by Infrastructure Investor.

The programme, which aims to improve the enabling environment for investment in the energy sector, will support investment from both domestic and foreign private sources. By improving tariff-setting and sector regulation, it hopes to allow greater scope for private investment, particularly in areas associated with clean energy, the ADB spokesperson said. 

Home to 40 percent of the world’s known geothermal resource, at an estimated 27.5 gigawatts (GW), and with substantial potential for other renewable energy sources, Indonesia is identifying measures to attract private investment to unleash its potential. 

The Indonesian government is aiming to increase the share of renewable energy in the total energy mix to 19 percent by 2019 and 23 percent by 2025. Currently, renewable energy inputs account for only five to six percent of the country’s total energy use.  

“In four to five years, there will be support in the energy sector of about $5 billion for energy purposes in Indonesia as a whole,” said Steven R Tabor, ADB’s country director for Indonesia.

Firms from Turkey and Australia have also expressed interest in investing in Indonesia’s energy space, according to ADB executives.

William Sabandar, chief of the New and Renewable Energy Acceleration Team, said that a Turkish company wants to invest in projects worth 35 gigawatts and that its representatives will soon come to Indonesia.

He added that another Turkish company is preparing to invest in the geothermal sector in Aceh and Java.

Australian firms are interested in Indonesia’s energy sector, including in both the renewable and conventional energy sectors, according to Sabandar. In November, more than 40 Australian companies will visit Indonesia to explore business opportunities, he said.

In collaboration with ADB, Indonesia’s Ministry of Energy and Mineral Resources (EMR) established the Centre of Excellence for Clean Energy – a research laboratory based in Bali to bring together knowledge and research on clean energy, facilitate clean energy investments and help deploy clean energy technology solutions to increase the input of renewable energy supply.

Sudirman Said, Minister of Energy and Mineral Resources (EMR), pointed out that the renewable energy supply in Indonesia is significantly under-utilised. “It happens because we do not have yet the innovation in the energy sector or the opportunity to build the renewable energy technology,” he said.