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Infrastructure & PPPs in Indonesia - Q4 2022 Update

YOG INFRA Q4 2022 insight series

INDONESIA is taking bold steps towards clean energy transition with multiple projects under development in partnership with international investors; across utility-scale solar, hydropower, floating solar, hydrogen and EVs. Another facet of energy transition is retirement of coal power plants, which is gaining momentum with support from DFIs.

Read more about key developments in Infrastructure and PPPs in Indonesia in our latest insight.

 

October 2022

CHINA DATANG SIGNS PPA FOR 450 MW INDONESIA PROJECT

The overseas unit of China Datang Corporation has signed a power purchase agreement (PPA) with a local utility for its first coal-fired power plant in Indonesia. The PLN UP3 will purchase electricity from the Meulaboh power plant for 25 years.

Construction of the facility, which will be able to produce 450 MW, started in 2019. It is scheduled to start commercial operations at the end year 2022. The project is located in West Aceh Regency. China Datang won the contract in 2017 and is implementing it in the build, own, operate, transfer model. The project will cost an estimated USD 600 Mn with the Export-Import Bank of China providing debt financing. It will supply power to 200,000 people in northern Sumatra.


CHINESE ALUMINIUM MANUFACTURER SEEKS SOLAR PARTNER FOR INDONESIAN FACILITY

A Chinese aluminium maker is looking for a development partner to build a solar power plant in its Indonesian industrial park. Shandong Nanshan Aluminum, which has its manufacturing facility inside the Bintan Alumina Indonesia Industrial Park – in which it is also a co-investor - is looking at setting up at least 50 MW of solar plant.

The development will be carried out in phases. Shandong Nanshan is open to partnerships with companies with a proven track record in solar development and welcomes proposals and preliminary discussions. It is also open to discussing options on the model of development, including a public-private partnership or a turnkey contract.

The industrial park will likely also feature other types of clean power projects, including wind, these are being planned mainly to supply electricity to the aluminium manufacturing plants. The USD 5 Bn Bintan Industrial Park occupies an area of 1000 hectares. It is under development and will house alumina and power plants, offices, and living areas, as well as a port facility capable of processing 20 Mn tonnes annually. Construction is scheduled to be completed within 10 years. The aluminium factories are planned to have an annual production capacity of 3 Mn tonnes.


INDONESIA PLANS USD 1 Bn WATER PROJECTS FUND

Indonesia has launched a USD 1 Bn investment vehicle focusing on projects to improve access to clean water. The government has mandated state-owned asset manager Danareksa, construction company Nindya Karya, as well as water supply companies Perum Jasa Tirta 1 and Perum Jasa Tirta 2 to jointly manage the Indonesia Water Fund (IWF) and build necessary infrastructure.

BUMN, which is the Indonesian Ministry of State-Owned Enterprises, signed a memorandum of understanding with the fund’s strategic partners - Danareksa, Suez Recycling Pacific and CITIC Envirotech Indonesia.

The fund will raise capital from private-sector investors. The platform will initially manage USD 1 Bn raised from its strategic partners. The platform's launch is in line with one of the goals of Indonesia’s sustainable development programme, which is to provide clean water for its communities.


SHENZHEN FIRM EVALUATES BALI SUSTAINABLE PARK PROJECT

Shenzhen Investment Holdings Corporation is considering investing in an industrial park in Indonesia that will feature waste management and renewable power projects. The conglomerate, owned by the Shenzhen city government, is assessing the feasibility of the Kura Kura Bali Island Innovation Park. It is currently doing an early stage study of the risks associated with the project and investments in Indonesia.

The size of the investment has not been determined yet. The park will focus on sustainable development and will feature offshore organic waste treatment, renewable power and distributed sewage management plants and other infrastructure projects. There will also be drinking water supply projects.

In the long term, the company is looking to shape Kura Kura island to be a sustainable innovation and tourism hub. So far, interested partners include ATM Capital, Auto Desk Maya, China State Construction Engineering Corporation (CSCEC), and retailer Mitra Adiperkasa.


INDONESIA’S USD 17.8 Bn HYDROPOWER PLANT TO BE OPERATION IN 2026

Kayan Hydro Energy (KHE) expects its 900 MW hydropower plant in Indonesia to be operational in 2026. The Kayan Cascade hydropower plant will be located on Borneo Island and will require a total investment of around USD 17.8 Bn.

Additionally, KHE has partnered with Japan-based Sumitomo Corporation to jointly develop the Kayan Cascade project. Sumitomo will provide investment for the hydropower project as well as transfer of technology.

Early development work is underway, with construction of a dam diversion channel scheduled to commence in 2023. Renewable energy (RE) generated from the facility will be supplied to a green industrial park being developed in North Kalimantan province as well as other sites on Borneo Island.


RETIRING INDONESIA’S COAL PLANTS WILL COST USD 37 Bn

Retiring all existing coal-fired power plants in Indonesia by 2040 is estimated to cost around USD 37 Bn. The amount will finance the purchase of about 10 years’ worth of contracted power purchase agreements (PPAs) as well as buying out future revenues of 118 coal plants. However, the estimated sum doesn’t include the cost of transitioning the plants to renewable energy (RE).

Some of the coal-fired facilities that are ready to be retired early include South Kalimantan’s Asam power plant, Paiton plants in Java and the Suralaya plant in Banten.

Currently, around 60 per cent of the total power generation is sourced from thermal power plants. Indonesia is also one of the main coal exporters. In 2021, the government announced plans to achieve net-zero emissions by 2060. Retiring all active coal-fired power plants is expected to offset around 1.7 gigatonnes of carbon emissions.


November 2022

INDONESIA CONSIDERS PPP FOR BANDUNG-SURABAYA RAIL

The Indonesian government is considering a public-private partnership (PPP) to finance the extension of the Jakarta-Bandung high-speed rail (HSR) line to Surabaya in the province of East Java.

The PPP could involve state-run firms as well as domestic and foreign private companies. Besides the HSR projects and a semi-fast network from Surabaya to the north, the government is also looking to construct metro and light rail routes in multiple cities - including in Bali, Bandung and Surabaya.

It will carry out a study involving multilateral lenders - such as the Asian Development Bank, the World Bank and the Japan International Cooperation Agency - and external consultants. The government is also focusing on completing the Jakarta-Bandung HSR, which is expected to become operational next year.


INDONESIA HIGH-SPEED RAIL SEEKS ADDITIONAL CHINESE FINANCING

A consortium constructing a 142 km high-speed rail (HSR) line in Indonesia is requesting an IDR 16.1 Trn (USD 1 Bn) top-up loan from the China Development Bank to finance a cost overrun on the project. The USD 6 Bn HSR, linking Jakarta with the city of Bandung, is facing increasing costs owing to issues including higher material prices, construction delays due to the pandemic and increasing land procurement costs, according to KCIC consortium, which consists of state-owned railway firm KAI.

The overrun is estimated to be around USD 1.45 Bn and China's top planning agency, the National Development and Reform Commission, has agreed that 75% of this amount should be financed by a bank loan. The remaining will be funded through an increase in stakeholder capital.

KAI is moving to seek a parliamentary nod for an IDR 3.22 Trn capital investment from the state, whereas China Railway Engineering Corporation and other Chinese state-run firms are likely to raise their stake by IDR 2.15 Trn.


INDONESIA PLANS USD 2 Bn EV FUND WITH CHINESE COMPANIES

Indonesia's sovereign wealth fund is looking to establish a USD 2 Bn green electric vehicle (EV) fund with Chinese battery manufacturer CATL and integrated financial institution CMB International. Indonesia Investment Authority (INA) has reached a deal with executives of the two Chinese firms. The fund will invest in the EV value chain.

The Southeast Asian country is looking to create its own EV and battery industries locally since 2020 after stopping nickel ore exports to ensure supply for investors. CATL, together with Indonesian companies, will plan a USD 6 Bn power battery project.


SAUDI'S ACWA TO DEVELOP INDONESIA FLOATING SOLAR PROJECTS

Indonesian state-owned electricity utility PT Perusahaan Listrik Negara (PLN) has awarded two floating solar power projects with a combined capacity of 110 MW to Saudi Arabia's ACWA Power Company. The solar projects include the 60 MW Saguling and 50 MW Singkarak floating solar farms in Indonesia with a combined investment of USD 105 Mn. ACWA will own 49% equity in the project, while the remaining will be held by a PLN unit Indonesia Power.

ACWA and PLN will start discussions on the power purchase agreement for the two projects soon, the projects are expected to be commissioned by the year 2025. PLN will purchase power from the projects. The floating solar project is power generation, water desalination and green hydrogen projects developer and operator ACWA's first foray into Indonesia as well as the company’s first floating solar projects.

Indonesia wants 23% of its total energy supply to come from renewables by 2025, as part of its National General Energy Plan.


FIRMS SIGN DEAL FOR 10 MW GREEN HYDROGEN PROJECT IN INDONESIA

Australia-based ReNu, its subsidiary Countrywide Hydrogen Private Limited and Anantara Energy Holdings Private Limited, have signed a memorandum of understanding (MoU) to conduct concept and feasibility studies for a large-scale green hydrogen facility in Indonesia. Plans include the development of a 10 MW electrolyser in the Karimun Special Economic Zone (SEZ), which has potential to produce around 1,650 tonnes of hydrogen annually. The feasibility studies will be jointly funded by ReNu and Anantra.

If the studies show positive results, Anantra intends to develop a 100 Photovoltaic (PV) plant to supply power for the production process. The capacity will be part of a larger 3.5 GW solar project that the JV is developing in Indonesia’s Riau archipelago.

Once production commences in 2025, the facility will be able to supply green hydrogen to the consumers in Indonesia as well as export it to neighbouring SEA countries and eventually Europe.


PLN TO SUPPLY SOLAR POWER FOR AMAZON’S OPERATIONS IN INDONESIA

PT Perusahaan Listrik Negara (PT PLN) has signed a power purchase agreement (PPA) with Amazon under which it will supply solar energy to power the company’s operations in Indonesia. The energy will be sourced from four renewable energy facilities in Bali and Java.

This move is part of Amazon’s goal of achieving net-zero for its global operations by 2040. It will also support the Government of Indonesia’s goal of speeding up the transition to clean energy through a collaboration between the private and public sectors.


CHINA HUADIAN PLANS 90MW INDONESIAN HYDRO PROJECT

China Huadian Corporation is looking to develop a 90 MW hydropower project in Indonesia. The state-owned power group is carrying out a feasibility study on the development of the Bonto Batu hydropower project. The Bonto Batu Hydropower Plant will be located in Enrekang Regency of South Sulawesi Province of Indonesia. It will feature a hydropower dam on the Mata Allo stream of the Sadang River.

The project will be connected with the Enrekang Regency Power Substation 8.5 km away. It will also feature flood control facilities. Huadian, which is one of the largest power producers by revenue in the country, is currently working to evaluate the financial viability and the overall feasibility of the project. It is among a growing number of Chinese developers that are looking at Indonesian hydropower investment.


December 2022

JAPAN FUND TO INVEST IN INDONESIA VEHICLE TEST FACILITY

The Japan Overseas Infrastructure Investment Corporation for Transport & Urban Development (JOIN) will provide up to JPY 1.4 Bn (USD 10.22 Mn) in capital and approximately JPY 5.4 Bn in debt guarantee for an automotive-related project in Indonesia.

The project involves designing, constructing, and maintaining a vehicle proving ground in Bekasi Regency, in the province of West Java, as a public-private partnership. JOIN, Japan’s government-private fund specializing in overseas infrastructure investments, will establish a new company —Indonesia International Automotive Proving Ground — with Toyota Tsusho and local partners to develop the facility and operate it for 15 years. The proving ground will also be able to handle certification testing for electric vehicles.


NEW ROUTES ANNOUNCED FOR SOUTH SUMATRA LRT

The Ministry of Transport (MoT) of Indonesia has announced plans to develop five additional routes for the South Sumatra Light Rail Transit (LRT) Feeder Transport project in Palembang city. The five new routes to be added are — Palembang–OPI Complex LRT Polresta station, RSUD–Sukawinatan LRT station, Hajj–Talang Betutu Dormitory LRT station, DJKA LRT station–Pasar Plaju terminal, and Cambodia–Bukit Siguntang station.

The new routes will complement the two existing corridors, namely Talang Kelapa–Talang Bad via the Hajj Dormitory station and the Hajj–Sematang Borang Dormitorystation via Jalan Noerdin Pandji. Currently, there are a total of 58 LRT feeder units. The higher number of feeder units are expected to increase the ridership onPalembang LRT. The South Sumatra LRT project is part of MoT’s National Movement Back to Public Transport (GNKAU) programme launched at the start of 2022.

 

List of Key Transactions - Indonesia Q4-2022

Source: YOG INFRA analysis, Subscription databases

 

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YOG INFRA is an infrastructure focused financial advisory firm. We work with Developers and Development Finance Institutions (DFIs) and help them make informed investment decisions across infrastructure development lifecycle.

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