PFAN Matchmaking and Bank Partnerships for Clean Energy Financing in Indonesia: Lessons Learned

Irman Boyle USAID Contractor Country Manager for Indonesia ECO-Asia Clean Development and Climate Program Asia Clean Energy Forum 2011
Manila, June 20-24, 2011

The Challenge

Coaching and mentoring businesses

The Missing Middle: Lack of Access to Financing

Seeking financing Seeking projects/ businesses
Investment Sources Rp,,$

PUSH

Clean energy businesses and projects

PUSH PUSH
Government (policies) Training and Advisory to Financial Institutions

Policy Dialogue

Required: Network, network, network Market knowledge Technical knowledge

CTI PFAN: A Multilateral Initiative

CTI PFAN Funding Partners

PFAN Modus Operandi: Clean Energy Financing Investor Forums

Asia Forum for Clean Energy Financing, Bangkok: March 2009, March 2010 Philippines Clean Energy Investor Forum: June 2009, June and Nov 2010 Indonesia Clean Energy Investor Forum: June 2009 and July 2010 China Clean Energy Investor Forum: October 2009 and September 2010 India Clean Energy Investor Forum: October 2010

Asian Regional Highlight

21 projects secured financial closure with investment of USD 274.6 million 33 partnerships fostered during 2009-2011 80 + Projects in development pipeline, with investment value of USD 1.4 billion USD 200 300 million: target leverage

Dedicated Country Networks India China Philippines Indonesia

Summary of PFAN Results (Apr 2009 May 2011)

21 projects -- 138 MW -- $274.6 million -- 12.2 m tons CO2

Breakdown of PFAN Projects

PROJECTS PER COUNTRY Cambodia China India Indonesia Philippines Thailand TOTAL TECHNOLOGY DISTRIBUTION Biogas Biomass Hydro Energy Efficiency Clean Transport Solar PV TOTAL 6 5 3 5 1 1 21 1 7 2 4 6 1 21

INVESTMENT BY CUNTRY Cambodia 2.5 China 41.6 India 9.2 Indonesia 88.2 Philippines 123.13 Thailand 10 TOTAL 247.6

PFAN in Indonesia
PFAN Investor Forum: Coaching, mentoring, matchmaking and holding Investor Forum in business plan competition format

PFAN Bank Mentoring Program: Training and advisory services for partner banks on clean energy projects

New strategy: two targets for PFAN assistance, i.e. working with project partners and potential lenders in closing financing transaction

Project Partners from Indonesia CE Investor Forum 2009 and 2010

Project Banten Global Synergy Tiara Energy (BSP) Wirajasa IPP Sarana Citra Persada (pilot project) Narpati Gikoko Mekanika Elektrika Egra Selo Kencana Energi (Lubuk Gadang) Mitra Edssa Markati Erasia Global (Pasui) Eco Power Indonesia (Sawangan) Indonesia Clean Energy (Dominanga) Restu Bumi Persada (Bintang Bano) Kutilang Bangun Persada (Northsum) Pasadena Biofuels Mandiri Indonesia Clean Energy Bakrie Power (Sokoria) Total Type Geothermal Biomass (rice husk) Biomass Wind Waste to fertilizer Landfill Wind Hydro Geothermal Hydro Hydro Hydro Hydro Hydro Wood pellets Biomass Geothermal Central Java West Java West Java West Sumatera East Java South Sulawesi North Sulawesi North Sulawesi West Nusa Tenggara North Sumatera West Java Jambi East Nusa Tenggara 250 tons/day 4 1 7.5 10 2 16 3.6 8.8 6 50 tons/day 8 30 Location Banten South Sulawesi East Java Size (MW) 110 10 7 Investment (US$ million) 275 24 21.7 6 8 10 1.5 12 20 3.7 28 6.6 12 15.6 1 15.5 127

connecting clean energy businesses with financing 237.9 607.6

Project Closures
IDI
Growth Sumatera Industries Medan Biomass Power Plant (2 x 15 MW) IDR 203,000,000,000 Equity and Loan Financing Lender and Shareholder October 2010 Lender and Shareholder December 2010 Kencana Agri Group Selo Kencana Energi Pakkat Minihydro Power Plant (10 MW) IDR 192,010,000,000 Equity and Loan Financing Lubuk Gadang Minihydro Power Plant (7.5 MW) IDR 159,000,000,000 Equity, Mezzanine, and Loan Financing Lender and Shareholder May 2011 April 2011 Growth Asia Medan Biomass Power Plant (2 x 15 MW) IDR 219,000,000,000 Equity and Loan Financing Lender and Shareholder

Three projects closings through our work with bank partners One project closing through our work with project partner Total 77.5 MW, Rp 773 billion (US$ 88.2 million), and annual GHG savings of 281,700 ton/year connecting clean energy businesses with financing

Lessons Learned
Financing Barriers: Lack of experience/trust among financiers and/or investors Entrepreneur: Lack of banking relationships/experience Entrepreneur: Lack of business track record Investor/bank: Lack of investment experience Mismatch between the available financing vehicle and project financing requirement Most debt financing is corporate finance loan Lack of risk capital (equity/mezzanine/public fund) High cost of capital

connecting clean energy businesses with financing

Lessons Learned
Project Entrepreneur: Help entrepreneur do their homework: But to what extent? Assist with project conception, pre-FS/FS, project structuring, PPA, for improving project readiness Help entrepreneur understand financing structure, for creating viable and bankable business proposal Investor: Seek investor with commitment, business track record, and own-money to invest. Create innovative financing vehicle that match project need Bank: Work with the regulator (Bank Indonesia) for the issuance of clean-energy friendly banking policy, encouraging banks to finance Provide banks with comprehensive assistance (at various stages of project development)
connecting clean energy businesses with financing

Lesson Learned: Match Financing with Stage of Technology Maturity

Pilot technology project Biogas, POME, landfill, wind

Minihydro, direct burning biiomass

Source: UNEP SEFI, 2008), and own analysis

connecting clean energy businesses with financing

PFAN Matchmaking and Bank Partnerships for Clean Energy Financing in Indonesia: Summary of Lessons Learned
Irman Boyle USAID Contractor Country Manager for Indonesia ECO-Asia Clean Development and Climate Program irman@cleanenergyasia.net
Asia Clean Forum 2011 Manila, June 20-24, 2011
connecting clean energy businesses with financing