YOG INFRA Q1 2023 insight series
INDONESIA has entered into collaborative agreements with multiple countries like US, Singapore, South Korea, Malaysia etc. to boost it's clean energy transition journey and associated infrastructure development, Emerging projects include a development of Nusantara city with an established PPP project pipeline and digital infra/ connectivity projects.
Read more about key developments in Infrastructure and PPPs in Indonesia in our latest insight.
January 2023
NEW CAPITAL NUSANTARA HAS 140 INFRASTRUCTURE PROJECTS
Nusantara city is planning 140 infrastructure projects, which range from roads, bridges, water supply, sanitation, housing, and so on. The Nusantara development has drawn the interest of various investors and countries like South Korea, Malaysia etc. among others. Indonesia needs approximately USD 31 Bn to build Nusantara. Only 20 % of the total funding comes from the state budget and rely on investors to cover the rest of the funding.
INDONESIA’S DIGITAL INFRASTRUCTURE OPPORTUNITY
In the lead up to the November G20 Leaders’ Summit, Indonesia, assisted by the Asian Infrastructure Investment Bank (AIIB), launched the Compendium of Case Studies on Financing Digital Infrastructure.
Submarine cables have been highlighted as critical digital infrastructure to enable international communications and data transfers. This infrastructure is the backbone of the digital economy, financial markets, and employment. A submarine cable investment would increase the number of internet users in Indonesia by 35 %.
Recently data centers have become a priority for Indonesia and have generated business opportunities for domestic and foreign investors. The Indonesian government has loosened investment barriers and provided incentives to attract investors. Data centers with an investment of more than USD 34 Mn will receive a tax exemption of up to 100%.
February 2023
INDONESIAN WASTE PPP IN PLANNING
A region of Indonesia has held a market sounding as it looks to finalize its plans for a waste PPP scheme. The Regional Government of the Special Region of Yogyakarta (Pemda DIY) held the market sounding in conjunction with the Indonesian Infrastructure Guarantee Agency for the Piyungan Regional Garbage TPA PPP project.
A private partner will be sought to design, build, finance, operate, maintain and transfer the structure, under a 21.5-year contract, including 1.5 years of construction.
INDONESIA AND SINGAPORE INK MOU TO BOOST RENEWABLES COOPERATION
Indonesia and Singapore have signed a Memorandum of Understanding (MoU) to enhance cooperation in renewable energy. The agreement will enable Indonesia to develop its renewable energy sector, including solar PV and battery storage systems, and promote cross-border electricity trade for mutual benefit. This will enhance the development of renewable energy manufacturing and capacity in Indonesia. This will not only help meet the domestic electricity demand but also create an opportunity to store excess power for future use or export, providing investment leverage for power export projects to Singapore.
The MoU signed between the two countries also includes collaboration on commercial arrangements and the development of transmission infrastructure to facilitate cross-border power trading. The partnership is expected to support Singapore's ambitious goal of importing up to 4 GW of low-carbon electricity by 2035.
March 2023
INDONESIA INFRASTRUCTURE GUARANTEE FUND TO BACK SMALL PPPS
Penjaminan Infrastructure Indonesia (PII), or the Indonesia Infrastructure Guarantee Fund, will boost its support for smaller public-private partnerships (PPP). The agency launched the PPP Smart Hub, a platform to encourage small projects including in the areas of street lighting, hospitals, bridges and drinking water supply systems. The vehicle aims to build an innovative financing ecosystem to help investors and lenders to jointly prepare PPPs of better quality as well more numbers of projects.
One of the projects it is guaranteeing is for road lighting equipment in Madiun regency, East Java. The state-backed agency distributed guarantees of up to IDR 95 Trn (USD 6.2 Bn) in 2022. This then supported the implementation of projects with an investment value of IDR 497 Trn in 2022.
CONSTRUCTION STARTS ON USD 2.6 BN HYDROPOWER PLANT IN INDONESIA
PT Kayan Hydropower Nusantara, a joint venture (JV) comprising PT Kayan Patria Pratama Group and Sarawak Energy Bhd, has commenced work on a USD 2.6 Bn hydropower plant in Indonesia. The 1.375 GW Mentarang Induk power plant will be located on the Mentarang river and is expected to come online in 2030. Once operational, the facility can generate around 9 TWh per annum.
The renewable energy (RE) generated will be supplied to a future industrial parkin North Kalimantan. The park will feature electric vehicle (EV) and battery plants among others. Energy generated from hydropower plants currently account for around 53 percent of total RE generated in Indonesia.
STEPS TAKEN TO BUILD RENEWABLE ENERGY INDUSTRY IN BATAM
Members of the Sustainable Energy Association of Singapore(SEAS) and multiple partners signed a memorandum of understanding (MOU) to produce equipment and build power plants for the renewable energy sector in Batam, Indonesia. The Green Corridor project in the largest city in the province of Riau Islands is estimated to attract $50 Bn of foreign direct investment and create tens of thousands of jobs.
This Green Corridor project is a win-win between Singapore and Indonesia and will open up many more renewable energy projects, where both countries will benefit tremendously and multiple partners working to develop the Green Corridor project include carbon exchanges, renewable power producers and infrastructure companies such as EDPR Sunseap, Vanda RE, Keppel, Huawei, as well as battery makers VFlow Tech Batteries and Narada Batteries.
INDONESIA AND US SIGNS MOU FOR CLEAN ENERGY WORKING GROUP
The Clean Energy Working Group MOU is an MoU regarding the establishment of a working group for the development of clean energy in Indonesia, this MoU will replace the Indonesia-United States MOU regarding the Power Working Group for Indonesia which was signed in 2015 and only focuses on electricity issues, on at that time the 35 GW program.
The areas of cooperation included in the Clean Energy Working Group MoU are super grid and/or smart grid, reducing the use of diesel generators, Small Modular Reactor (SMR) Technology, cyber security, Carbon Capture and Utilization Storage (CCUS); microgrid, digitization, energy storage, smart city, generator efficiency, bioethanol, and geothermal. This MoU can serve as an umbrella for cooperation between the Ministry of Energy and Mineral Resources and the US Department of Commerce with an initial focus on helping Indonesia achieve the goal of 23% contribution from the renewable energy network by 2025 and to achieve Net Zero Emissions (NZE) in 2060 or sooner.
CHINA GUODIAN PLANS 100 MW INDONESIAN FLOATING SOLAR
China Guodian Corporation, one of China's largest energy groups by revenue, is evaluating a project to develop 100 MW of floating solar in Indonesia. The company is seeking advisors for a feasibility study for the project, to be located in Sumberpucung, a sub-district in Malang regency, East Java province, Java island. The asset will be tentatively named the Karangkates Reservoir, and China Guodian expects to sell the electricity it produces to the state grid.
The company, which has been bidding for solar projects across Belt and Road countries, is among an increasing number of Chinese energy investors active in Indonesia. The others include China Huadian Corporation, which is looking to develop a 90 MW hydropower project in South Sulawesi province, as well as China Huaneng Group, which is exploring greenfield hydropower opportunities on Sulawesi Island. The demand for power here is from the mining industry.
List of Key Transactions - Indonesia Q1-2023
Source: YOG INFRA analysis, Subscription databases
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