Infrastructure & PPPs in Indonesia - Q3 2023 Update
YOG INFRA Q3 2023 insight series
INDONESIA aims to use PPPs increasingly for infrastructure project dveelopment in Nusantara to build the new capital city. There are also an increasing number of partnerships being annouced in clean enery generation & waste manegement sectors in the last quarter. Innovative financing through guarantee schemes is being explored to alleviate some of the country, macroeconomic and regulatory risks with planned projects in the country.
Read more about key developments in Infrastructure and PPPs in Indonesia in our latest insight.
INDONESIA AND UK ANNOUNCE GREEN INFRA PARTNERSHIP
Indonesia and the UK have announced a strategic partnership aimed at fostering sustainable economic development and cooperation, focusing on green infrastructure, renewable energy, climate resilience and adaptation, and related sectors. The partnership was formalized through an investment framework agreement (IFA) between sovereign wealth fund Indonesia Investment Authority (INA) and British International Investment (BII), the UK’s development finance institution and impact investor. Through this IFA, the parties intend to create a more enabling environment to facilitate investments and partnerships in private sector businesses in Indonesia.
Earlier this year 2023, INA made its first strategic investment in green energy through Pertamina Geothermal Energy. Additionally, it has jointly established a green electric vehicle (EV) fund with Contemporary Amperex Technology to concentrate on end-to-end EV value chain investment, primarily in Indonesia. It is also working with the Asian Development Bank and Cirebon Electric Power on energy transition. As part of its current 2022-26 investment strategy, the BII re-entered Southeast Asia, including Indonesia, with plans to invest up to GBP 500 Mn (USD 651.1 Mn) across the capital structure to support the region’s green energy transition.
CHINA'S CEVIA PLANS USD 171 Mn INDONESIAN EFW PROJECT
Chinese waste management company Cevia Enviro to build a greenfield energy-from-waste (EfW) project in Indonesia's Banten province with Jakarta-based Oligo Infrastructure Group.
The EfW plant, to be built in Tangerang city, will process 2,000 tonnes of waste, and produce up to 39 MW of power per day. It will cost about IDR 2.58 Trn (USD 171 Mn) to build and will be awarded as a 25-year concession. The construction period is 2 years. The electricity generated will be sold to state-owned utility PLN, covered by a long-term contract and the waste will be classified and treated at the Rawa Kucing landfill site. This will be the first EfW project in the metropolis. Henan provincial government owned Cevia Enviro is keen to explore greenfield EfW projects in other Indonesian cities, Bangladesh and Thailand. The company is looking at potential investments in Chattogram in Bangladesh, in the island of Phuket in Thailand, and in Surabaya, the capital city of Indonesia's East Java province.
KOREA WATER DISCUSSES INDONESIA NEW CAPITAL PROJECTS
The Korea Water Resources Corporation (K-Water) is interested in developing water management projects in Indonesia. K-Water is the largest water company in South Korea. K-Water’s existing projects in Indonesia include the Karian Dam in West Java, implemented in the PPP mode. The company also built the Sepaku Semoi water treatment plant at Nusantara which features low-carbon solutions. The pair are also looking to facilitate knowledge and technology exchange and project capacity building. Indonesia also has many projects to be developed at IKN Nusantara.
Separately, K-Water signed an agreement to collaborate with International Water Resources Association and Asia Water Council on a pilot smart water evaluation project in Indonesia’s Semarang, the capital and largest city of Central Java province in Indonesia. This will involve an assessment of the city’s water supply system and a proposal on how to improve it.
SUN ENERGY PARTNERS WITH PLN ON WEST JAVA PROJECTS
Indonesian solar power developer SUN Energy has signed a memorandum of understanding (MoU) with national electric company PLN (Persero) to develop greenfield rooftop solar projects. SUN Energy, which develops and owns green energy projects across Indonesia, will develop the projects in the West Java province of the country as part of the MoU. The two entities will sign a definitive agreement in the coming days to decide the generation capacity of solar projects to be developed in West Java. The partnership will also include the sale of renewable energy certificates by PLN to off takers including SUN Energy’s customers.
INDONESIA TO HAVE AN E-BUS MANUFACTURING PLANT
PT VKTR Teknologi Mobilitas (VKTR) has announced plans to build a battery-operated bus assembly plant in Javan City, Indonesia. The project will be executed in partnership with TriSakti and China-based BYD Company Limited. The plant will be used to produce electric buses using locally produced parts. The chassis will be imported from China. Initially, the facility will be able to produce around 500 units annually. Local production will be key in reducing the per unit cost of buses in Indonesia in light of increased rates of fleet electrification. By 2030, Trans Jakarta plans to have at least 10,000 e-buses. VKTR is supplying the BYD K9 fleet for use on Trans Jakarta bus routes.
ACCELERATING PSN COMPLETION TO BOOST INDONESIA'S ECONOMIC GROWTH
In the latest adjustment to National Strategic Project (PSN), there are 210 projects and 12 programs in the list that will be accelerated by the government. Their investment value is recorded at IDR 5,746.4 Trn (USD 373.8 Bn). Changes in the number of PSNs are in line with various evaluations carried out, as well as new proposals using basic criteria and operational criteria.
The PSNs included toll road infrastructure development projects, non-toll national or national strategic road projects, intercity rail facilities and infrastructure projects, inner-city rail projects, airport revitalization projects, construction of new airports, and other strategic airport development projects. With these developments, there are 25 remaining projects targeted for completion in 2023 and 31 projects for 2024.
CHINA HUADIAN PLANS INDONESIAN ENERGY TIE-UP WITH PTBA
China Huadian Corporation is interested in a tie-up on Indonesian energy projects with Indonesian state utility PT Bukit Asam (PTBA). China Huadian’s international business focuses on power projects investment, while it also involves engineering and construction, technical services, and international trading.
For 2021-2025, the company plans to step up its overseas green energy investments, including hydro, wind, and solar project development. Indonesia has become the most important Belt and Road market for Huadian following more than two decades’ dedicated business development here. Huadian and PTBA will leverage each other’s strengths in project planning and management and seek new collaboration opportunities.
AGREEMENT SIGNED FOR CLEAN ENERGY MEGAPROJECT IN INDONESIA
Singapore-based Vena Energy has signed a framework agreement with China-based SuntechPower Holdings Company Limited (Suntech), Rept Battero Energy Company Limited (REPT)and United States-based Powin Energy for a clean energy hybrid megaproject in Indonesia. The project, located in the Riau Islands province, will combine up to 2 GW of solar PVgeneration capacity with a battery storage of 8 GWh.
The partners will also explore opportunities to create local production lines for solar PV modules and BESS components. Additionally, Vena Energy has also signed an agreement with Shell Eastern Trading, a subsidiary of Shell, for the cross-border supply of energy generated to Singapore.
CONSORTIUM TO DEVELOP WTE PLANT IN WEST JAVA
PT Energia Prima Nusantara (EPN) has partnered with a consortium comprising Sumitomo Corporation and Hitachi Zozen Corporation to develop the Legok Nangka Waste to Energy (WtE) Plant in Bandung Regency, Indonesia. The project is expected to cost IDR 3.19 Trn (USD 208.87 Mn)and the concession period for operation has been extended by 22 years.
The consortium, together with the West Java Provincial Government, will manage the processing of 2,000 tons of waste daily under a public private partnership (PPP) arrangement. The plant will process waste from the Bandung Regency, Bandung City, Sumedang Regency, Cimahi City, West Bandung Regency, and Garut Regency.
CHINA EVERBRIGHT PREPARES BIDS ON SOUTHEAST ASIAN EFW PROJECTS
China Everbright Environment Group, the country’s largest environment conglomerate by assets, is planning to bid on greenfield energy-from-waste tenders in Southeast Asian countries. The countries that the state company is now looking at include Vietnam, Malaysia, Thailand, Indonesia, and the Philippines, where it has been following up on many potential projects with some awaiting regulatory procedures from the host country governments to proceed to the next stage. The group is preparing for bids in view of the rising market opportunities in the region, and the welcoming attitude towards Chinese investors and close trade ties has also contributed to Everbright’s decision to push into the Southeast Asian waste market. For new overseas deals, it might have some good news to update in the second half of the year.
Everbright Environment is also exploring waste project development opportunities in Hong Kong, with a focus on EfW and organic waste treatment. The company is interested in participating in government tenders and is also keen to help the Hong Kong government with the city’s overall new roadmap to combat climate change, which could involve the launch of new solar and electric vehicle charging projects.
CHINA-ASEAN FUND TO TIE UP WITH ASIAN CREDIT GUARANTEE PLATFORM
A quasi-sovereign Chinese equity fund - China-ASEAN Cooperation Fund (CAF) II - will tie up with the Association of Southeast Asian Nations (ASEAN)-backed Credit Guarantee and Investment Facility (CGIF).
Chinese Premier Li Qiang, who made the announcement this week at the ongoing East Asia Summit in Indonesia, did not provide further details. The fund, sponsored by the China Export-Import Bank, was set up to invest in sectors including infrastructure, energy resources, information, and communications in ASEAN countries. The credit guarantee investment facility was launched in 2010 with capital contributions of USD 700 Mn from ASEAN, China, Japan, South Korea and the Asian Development Bank.
INDONESIA TO PRIORITIZE PPP FOR NEW CAPITAL CITY'S INFRASTRUCTURE
The Indonesian government will prioritize public-private partnerships (PPP) for infrastructure projects in its capital city Nusantara. The government will prepare a simpler and faster PPP scheme. The completion period for projects will be shorter and the private sector will receive tax incentives. The PPP scheme can encourage private participation in the development of the capital city's infrastructure.
In addition, the government will grant various incentives to investors, including tax incentives. The government is committed to creating a conducive investment climate for Nusantara's development. The government will also ensure legal certainty and consistency in the implementation of Nusantara's development.
List of Key Transactions - Indonesia Q3-2023
Source: YOG INFRA analysis, Subscription databases
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