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PT SMI highlights role as ETM Country Platform Manager at Japan RE Invest Indonesia 2023
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PT SMI’s Advisory Division Head Ekha Yudha Pratama graces the stage at Japan RE Invest Indonesia 2023 in Tokyo. Held on March 3, the event saw Ekha give a presentation on the Energy Transition Mechanism (ETM) in Indonesia. (Courtesy of the Embassy of the Republic of Indonesia in Tokyo)
F
inancing is an essential part of the energy transition that Indonesia needs to achieve its 2060 net-zero emissions target. One mechanism expected to support the country’s retirement of existing coal-fired power plants and replace them with clean energy is the Finance Ministry-led Energy Transition Mechanism (ETM), with state-owned infrastructure financing company PT Sarana Multi Infrastruktur (Persero) or (“PT SMI”) as ETM Country Platform Manager.
According to PT SMI’s Advisory Division Head Ekha Yudha Pratama, the company has so far coordinated with relevant stakeholders, namely ministries and state-owned electricity company PLN, and is in the midst of conducting a comprehensive study on fiscal support needed for the energy transition.
During his presentation on the ETM at Japan RE Invest Indonesia 2023, Ekha explained that PT SMI will implement a blended finance approach to finance energy transition projects from PLN and independent power producers (IPPs). Through this approach, the combination of funding will be sourced from the government’s budget, the Indonesian Investment Authority (INA) and philanthropic organizations, as well as multilateral and bilateral development finance, among other sources.
“What is the function of a country platform in blended finance? If the [energy transition] project needs government support it can go through the country platform manager, but if it doesn’t need government support it can go through a B2B [business-to-business partnership],” explained Ekha.
The ETM is currently in its first phase of development, which, in line with the progress of the energy transition in Indonesia, focuses on the early retirement of inefficient coal-fired power plants. Ekha noted that the second phase will be the scaling up of renewables in the national energy mix, followed by developing interconnecting grids and concluding with energy efficiency measures.
To support the ETM, Ekha mentioned that PT SMI had joined hands with 17 partners. Among them are grant partners consisting of Bloomberg Philanthropies and the Global Energy Alliance for People and Planet, financing partners HSBC and Japan Bank for International Cooperation, USAID and the Climate Policy Initiative as knowledge and technical partners, in addition to the INA sovereign wealth fund as an investment partner.
These partnerships marked a highlight in both the progress of the ETM in Indonesia and PT SMI’s role as its country platform manager. Most importantly, it will provide PT SMI with the support needed to conduct the early decommissioning of coal-fired power plants owned by PLN and by IPPs.
For PLN coal-fired power plants, PT SMI is in the middle of conducting discussions with PLN on two methods. First, is a program loan to speed up the retirement and increase the energy mix of PLN toward green energy. Second, is the divestment method to reduce the burden on PLN’s balance sheet.
“We are in the middle of conducting several studies related to the program loan to help PLN achieve its target on the transition to renewable energy. About divestment or asset spin-offs, we are making some calculations with the [Finance] Ministry and related parties on what we want to do with the assets”, said Ekha.
Meanwhile, for IPP coal-fired power plants, the INA will invest in an IPP project in the form of an acquisition while SMI will participate as a co-investor.
In addition to supporting the early decommissioning of coal-fired power plants, the PLN and IPP projects are set to encourage the implementation of a just and affordable transition scheme, provide additional CO2 emission reductions toward Indonesia’s nationally determined contribution (NDC) achievement, and promote carbon finance.
Established by Tenggara Strategics in cooperation with the Centre for Strategic and International Studies (CSIS) Indonesia, Japan RE Invest Indonesia 2023 was held in Tokyo on March 3 and is the third multistakeholder event of its kind.
The event brought together the Indonesian Embassy in Tokyo, PLN, PT SMI, the Energy and Mineral Resources Ministry, and energy companies from Indonesia and Japan to discuss renewable energy policy updates and investment opportunities, as well as energy transition financing through the Just Energy Transition Partnership (JETP) and Energy Transition Mechanism (ETM) in Indonesia.
The hybrid forum served as a side event to the Asia Zero Emissions Community (AZEC) Ministerial Meeting, hosted by Japan’s Ministry of Economy, Trade and Industry (METI) on March 4, and was attended by 205 participants from 145 institutions.
This article is written in partnership with Tenggara Strategics.
