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PT SMI expands on climate finance, ETM at South Korea RE Invest Indonesia 2023
Accelerating the shift to green energy in achieving Indonesia’s climate targets, including net zero emissions by 2060, requires innovative financing.
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Director of PT SMI, Pradana Murti (right panel), and ADB’s Country Director for Indonesia, Jiro Tominaga (right, left panel) attended a discussion at South Korea RE Invest Indonesia 2023-Business Forum on 50 Years of Indonesia-Korea Relations as panelist, moderated by Executive Director of Tenggara Strategics, Riyadi Suparno (left, left panel), held in a hybrid format on May 3 at the Oakwood Premiere Hotel in Incheon, South Korea. (Courtesy of the Indonesian Embassy in Seoul)
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ccelerating the shift to green energy in achieving Indonesia’s climate targets, including net zero emissions by 2060, requires innovative financing. State-owned infrastructure financing company PT Sarana Multi Infrastruktur (Persero) or (“PT SMI”) is among those taking the lead, providing financing and investment, project preparation, and advisory services to accelerate national development in a sustainable manner.
The company’s focus on energy transition is further reflected in its role as ETM Country Platform Manager with the Energy Transition Mechanism (ETM), led by Indonesia’s Ministry of Finance.
Speaking at South Korea RE Invest Indonesia 2023-Business Forum on 50 Years of Indonesia-Korea Relations on May 3, Pradana Murti, Director of PT SMI, elaborated on the company’s climate financing products.
PT SMI’s data that was presented by Pradana as of March show that the company has financed up to 1 gigawatt (GW) in renewable energy projects across Indonesia worth a total of US$483.8 million. The majority of funds has been allocated to hydropower plants, indicating their maturing development in the country as a renewable energy source, while other funding went to geothermal, solar, biomass and wind power plants.
“PT SMI has done quite a lot with regards to finance green projects such as renewable energy and climate mitigation and adaptation projects in Indonesia, with total commitment of USD 483.8 million. Moreover, we also provide financing to municipalities through infrastructure financing. Soon, we will be able to provide financing to programs being designed by municipalities to achieve net zero”, Pradana told the hybrid forum, which was hosted jointly by Tenggara Strategics and the Centre for Strategic and International Studies [CSIS] in Indonesia and by the Indonesian Embassy in South Korea.
As PT SMI is committed to provide financial support that can be tailored to match energy transition projects, Pradana emphasized that it was necessary for the company to form strategic partnerships with both national and international institutions, such as ministries and governmental agencies, state-owned and private entities, as well as banks and capital markets.
As ETM Country Platform Manager, PT SMI has forged partnerships with various initiatives and organizations, including multilateral and bilateral institutions, philanthropies, private sectors, and state-owned electricity company, PT PLN. Through these partnerships, PT SMI is conducting studies, in particular for financing its coal-fired power plant early retirement program under the ETM.
Pradana expanded on the ETM, noting that the mechanism will use a blended finance approach that combines funds sourced from several public and private entities with the state budget, including but not limited to bilaterals, multilaterals, donors and philanthropic organizations. As ETM Country Platform Manager, PT SMI has a central role in matching the blended funds with the energy transition projects of either PLN or independent power producers (IPPs).
According to Pradana, PT SMI offers three financing schemes under the ETM, two of which specifically target PLN: result-based loans and divestment. The third scheme is IPP equity investment, designed for coal plant retirement projects.
He reiterated that collaboration was key to providing the best financing for the energy transition, and that PLN was one of its key partners.
“PT SMI, as ETM Country Platform Manager, tries to collaborate with all parties to provide a source of funding and provide the best project and financing structurse to the projects,” told Pradana.
“We are planning to create an asset class in energy transition, where power purchase agreements with PLN will be the foundation of the transactions.”
The forum was supported by PT SMI, PLN, the Finance Ministry, the Nusantara Capital City (IKN) Authority, Bank Indonesia (BI) and KB Kookmin Bank, and saw the attendance of around 100 offline participants in Incheon, South Korea, and 60 online participants representing energy companies and government agencies from both Indonesia and South Korea.
The South Korean forum is part of RE Invest Indonesia 2023, the third edition of the multistakeholder event established by Tenggara Strategics and CSIS with the aim to bring together industry players from Indonesia, China, Japan and South Korea to invest in Indonesia’s renewable energy sector.
This article is written in partnership with Tenggara Strategics.
