Speaking at China RE Invest Indonesia 2024 on April 1, PT SMI financing and investment director Sylvi J. Gani elaborated on PT SMI’s role in renewable-energy development.

The company, tasked with accelerating infrastructure development in the country, offers various products to support such development in a way that can attract private capital and financing for renewable-energy projects.

These include financing and investment, such as green loans and equity investment; de-risking, which includes a reimbursable grant to support geothermal exploration; project development, in which PT SMI supports renewable-energy projects from their early stages of preparation through a geothermal fund (PISP) and grants for project development support; and partnerships, offering the SDG Indonesia One blended-finance platform and serving as the country platform manager of the energy transition mechanism (ETM).

With PT SMI’s task as ETM country platform manager, the company is responsible for seeking and mobilizing a blended source of funds ranging from government funds and multilateral loans to philanthropy and capital market bonds, which will then be channeled to finance energy-transition projects that support renewable-energy development and transmission lines. This financing is then channeled either directly or indirectly to the project.

Sylvi noted that financing energy-transition projects is one of the key challenges in Indonesia’s renewable-energy development.

“One of the key challenges in renewable-energy development is financing and the project’s readiness. Public funding will not be sufficient to finance all the development of renewable energy. There should be a significant contribution of private capital to support this renewable-energy development”, explained Sylvi.

In addition to the company’s diverse products, as the special mission vehicle (SMV) of the Finance Ministry, PT SMI has also equipped itself with programs and approaches to support the sustainable development of the country’s financing in climate change and renewable-energy development.

According to Sylvi, the company has an environmental and social safeguard (ESS) framework, implemented for any decision taken by PT SMI. The company also has a sustainable financing division, established in 2016 with the responsibility of providing financing for sustainable projects. Additionally, PT SMI is the first entity in Southeast Asia accredited by the Green Climate Fund, as the world’s largest climate fund, mandated to support developing countries raise and realize their nationally determined contributions (NDCs), ambitions toward low-emission, climate-resilient pathways.

Sylvi added that PT SMI faced challenges when working with renewable-energy or climate-change projects but offered possible solutions to overcome these challenges. For instance, in the phasing out of coal-fired power plants, challenges are present in the potential opportunity cost of retiring these plants. PT SMI’s possible solutions for this specific challenge include increasing the availability of concessionary financing and potentially monetizing carbon credits.

Moreover, regarding renewable-energy acceleration, Sylvi mentioned that the company encounters issues with project readiness, in which the project requires more feasibility studies and due diligence. Subsequently, solutions may involve providing support for project development or offering de-risking instruments to catalyze private-sector investment.

“PT SMI provides the solution by providing support for the project development using the products and partnerships we have”, said Sylvi.

Hosted by the Indonesian Embassy in Beijing together with Tenggara Strategics and the Centre for Strategic and International Studies (CSIS) Indonesia, China RE Invest Indonesia 2024 is part of the RE Invest Indonesia series, a renewable-energy investment forum aiming to bring together industry players from Indonesia, China, Japan and South Korea to invest in Indonesia’s renewable-energy sector.

With an attendance of 90 offline participants in Beijing and 57 online participants via Zoom, China RE Invest Indonesian 2024 featured a panel discussion on renewable-energy exports to Singapore, as well as a business-matching session between Chinese investors and Indonesian renewable-energy project owners.

This article is written in partnership with Tenggara Strategics

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