1. 1 March 22 nd, 2006 Satrio Wibowo Executive Researcher Banking Research and Regulation Directorate Bank Indonesia Financing Policy for Renewable Energy Development in Indonesia

2. 2 Background Financing Conclutions Outline

3. 3 Increase in: -population -Economic activities -Living Standard Increase in: -population -Economic activities -Living Standard - Energy Demand Increase (200%) - Electricity Demand Increase (350%) - Energy Demand Increase (200%) - Electricity Demand Increase (350%) Environmental Issue: - Global Warming - Air Pollution - Acid Rain - Health Environmental Issue: - Global Warming - Air Pollution - Acid Rain - Health TYPE OF ENERGY SELECTION Fossil Energy (hydrocarbon resources) OIL COAL Gas NEW AND RENEWABLE ENERGY Hiydro, Microhydro Solar, wind, biomass, geothermal, hydrogen Nuclear EnvironmentINFRASTRUCTUREENERGY RESOURCESSOCIO-CULTURALGEOPOLITICSECONOMY BASED ON NATURAL RESOURCES BASED ON TECHNOLOGY NATIONAL ENERGY PLAN 2000-2025 2000-2025 “Comprehensive Assessment of Different Energy Source for Electricity Generation in Indonesia”, 2002. Source: Ministry of Research and Technology Background (1)

4. 4 Prospects: Good Prospects of Renewable energy: –Higher oil price and limitations of fossil energy push renewable energy development. –Population growth and development of industry that needed electrical energy is bigger than development of energy resources. –PLN capacities only serve 65% of Indonesian populations –The rest of people doesn’t have access from the PLN services of which 80% live in rural areas. Background (2)

5. 5 Financing Alternative of Hydropower Sources: 1. Direct Investment: Government Private 2. Banking 3. Non Banking: Capital Market (bond, shares), Finance Companies Financing (1)

6. 6 Current Banking Development Financing (2)

7. 7 Constraints Some Constraints: a.Renewable energy such as hydropower project is something new for banking business. Most of banks don’t have enough knowledge about the prospects and risks of this business. b.Small Medium Enterprises (SME’s) who run business usually not bankable due to the lack of legal status and the collateral. c.The payback period of the investment is relatively long term. Financing (3)

8. 8 Recommendations Some recommendations: 1.Enhance the knowledge of bankers Government support to provide workshops, training, and business meeting 2.Make the project bankable Guarantee scheme by government/PLN Guarantee scheme in cooperation with PT.Askrindo or local credit guarantor institution. Financing (4)

9. 9 Financing (5) Guarantee Scheme Local Parliament Debtors (SME’s) BANK INDONESIA (Mediator) Banking Association, BDS Local gov. MOU-Guarantee Building skill ASKRINDO MOU *) Guaranteed credit Approval Guarantee Scheme Proposal Local credit guarantee institution *) 1. Overhead cost or 2. Risk Sharing

10. 10 Conclusion Renewable energy resources for Indonesia is a need. Need strong committment from all national elements. Besides the financing from banking sector we have to develop capital market, securities, finance companies, etc. to fulfill the purpose.

11. 11 Thank You