1. How Can We Make 35,000 Megawatts ‘Green’?
Indonesia Green Infrastructure Summit
Sinthya Roesly, CEO
Jakarta – June 9, 2015

2. GoI is embarking on a major 35,000MW program to keep up with the growing electricity demand in Indonesia
Approximately 60 percent will be using coal fired technology and the rest includes among others renewable energy
There are growing concerns on how to manage the environmental impact of the power generation scale up program
IIGF is actively involved in infrastructure public private partnership projects, and have methods to ensure the incorporation of environmental sustanability perspective in the project it supports
BACKGROUND
Guarantee for Infrastructure PPP Projects
Contribution to Environmental Sustainability
Environmental Risk Mitigation Plan
35000MW
Coal
Guarantee Support for Renewable Energy Projects
Non-Coal

3. Indonesia Infrastructure Guarantee Fund
IIGF PROFILE AND BUSINESS MODEL
Indonesia Infrastructure Guarantee Fund
Establishment
30 December 2009
Ownership
100% Goverment of Indonesia
Presidential Regulation (Perpres) no.38/2015
Presidential Regulation No.67/2005, j.o. No.13/2010, No. 56/2011 and No 66 /2013
Presidential Regulation No. 78 tahun 2010
Minister of Finance Regulation (PMK) No. 260/PMK.011/2010
Goverment Regulation No. 35 tahun 2009
Goverment Regulation No. 88 tahun 2010
Goverment Regulation No. 55/2011
Goverment Regulation No. 68/2012
Legal Basis
Mandate
To provide guarantees to private sector on the performance of Government Contracting Agencies’ financial obligations set out in PPP Agreement for infrastructure projects
Lembaga Perbankan Penyedia Infrastruktur Indonesia
To manage government infrastructure guarantee on PPP model (under Ministry of Finance)
Authorized Capital IDR9 trillion (~USD 1 billion) (Paid in Capital as per 2015 State Budget  + IDR 7 trillion)

4. Possible Risk Coverage of Infrastructure Guarantee
IIGF GUARANTEE STRUCTURE
Guarantee Structure
Possible Risk Coverage of Infrastructure Guarantee
Financial obligations of Government Contracting Agency which are quantifiable or has a clear compensation amount formula stipulated in the PPP Agreement.
Examples: delay in obtaining permit/license, change in law/regulations, breach of periodical tariff adjustment, breach of contract (default), minimum patronage, etc.
Risiko akibat tindakan Pemerintah dan risiko politik
* Recourse means the right of Guarantor to claim back to GCA upon every payment made against valid claim from the guaranteed party (Project Company ).

5. ADDED VALUE OF IIGF’S OPERATIONS
1. IMPROVING CREDITWORTHINESS OF PPP PROJECTS
Managing the provision of government guarantee to improve creditworthiness of infrastructure PPP projects
2. RISK ADVISORY TO GOVERNMENT
Providing advise to the government on risk allocation and mitigation in infrastructure PPP projects
3. CAPACITY BUILDING BY IIGF INSTITUTE
IIGF Institute is IIGF’s contribution to support the betterment of Indonesia’s infrastructure sector through workshops, capacity buildings and research.

6. Benefit of the Guarantee ENHANCE TRUST FROM INVESTORS & LENDERS
ADDED VALUE OF GUARANTEE
GCA
Benefit of the Guarantee
Responsible for Financing, Design, Construction, and Operation
GUARANTEE GOVERNMENT’S PERFORMANCE AS CONTRACTING AGENCY TO THE PRIVATE SECTOR
To determine the specification and standard level of services.
Financial Obligation (based on the PPP Agreement)
Private Sector
ENHANCE TRUST FROM INVESTORS & LENDERS
IMPROVE SUCCESS IN FINANCING, INCLUDING POTENTIAL ENHANCEMENT OF TENOR, INTEREST OR FINANCING CONDITIONS
IIGF Guarantee is to Ensure Private Sector on the Fulfillment of GCA Financial Obligations, without shifting the responsibility away from GCA

7. APPRAISAL FUNCTION OF IIGF
IIGF has relatively strict guarantee assessment process
PPP Agreement
Project Evaluation
Regulatory Compliance
Pre-FS
Arbitration Clause
Risk allocation
Competitiveness
Project viability
CA commitment
IIGF will appraise project feasibility on technical, financial, economic, social, environmental
Proper and reasonable risk allocation
Competitive tender process
Appraisal to ensure bankability and fairness of risk allocation
Developed with assistance of credible advisors/experts
Binding arbitration clause in PPP Agreement
Various aspects to be assessed

8. ENVIRONMENTAL RISK PERSPECTIVE
Environmental Perspective in IIGF
Environmental and social desirability is one of the appraisal criteria in IIGF
Environmental and social impact must also be seen from a risk perspective:
AMDAL or ESIA should not just be about compliance!
AMDAL or ESIA should fulfill sufficient level of analysis and baseline information to identify potential risk and determine mitigation measures
Environmental risk mitigation is a whole-of-life effort, beginning from appraisal stage, and continuously managed or monitored during project operations through project monitoring
Projects with desirable environmental and social impact will likely obtain public support in the long term  On the contrary, project with adverse social and environmental impact will trigger public rejection
Environment Issues
Power Plant (Coal)
Water consumption for cooling
Dust emission from chimney
Temperature of waste water
Waste to water from coal stockpiles
Groundwater contamination from landfill
Radiation from High Voltage Overhead Transmission

9. RENEWABLE ENERGY Hydro Power Biomass Power Geothermal
IIGF Potential Support to Renewable Energy
PPA creditworthiness
Credit enhancement of Contracting Agency performance risk
CA Assistance
Assistance to Contracting Agency in underwriting interactions
IIGF Institute
Capacity Building for Line Ministries & Local Governments
Risk Mitigation
Licensing Risk (i.e. Geothermal license vs PPA)
Hydro Power
Biomass Power
Geothermal

10. NOTES ON GREEN INFRASTRUCTURE PPP
Pre-requisite for PPP
Healthy Competition
Financial Viability
Social Acceptability
Presence of Local Competent Developers (as partner for foreign investors
Green Infra Challenges
Limited technology provider
Higher technical risk
Greater Cost of Service
Technologies to mitigate environmental risk may result in higher upfront cost, while true cost of dealing with environmental impact may often get understated  bidding process can deal with this issue
Other important agenda to address the challenges:
Fiscal support mechanism
Public and private risk allocation framework
Supporting regulatory framework
Domestic capacity development roadmap
Improvement of PPP procurement process including standard for technology and documentations

11. WHERE WE ARE NOW
PROJECTS WHICH HAVE COMPLETED IIGF’S GUARANTEE PROCESS
Guarantee for power sector : 1) Batang Coal Fired Power Plant 2x1000MW + Rp.40 trilyun; 2) Sumsel 9 & 10 Minemouth Power Plant 3 x 600MW + Rp.45 trilyun; 4) Toll Road: Ps Koja-Soreang
PROJECTS CURRENTLY UNDER IIGF’S GUARANTEE PROCESS*
1) Clean Water: Lampung, Umbulan & West Semarang; 2) Railway: Halim-Soekarno Hatta Express Rail
INTERNATIONAL STRATEGIC PARTNERSHIP
1) Financing: World Bank; 2) Cooperation: Multilateral Investment Guarantee Agency (MIGA), OPIC USA, China EXIM, etc
* Projects under process still awaits progress from the respective project’s responsible agency with respect to their project preparation or transaction, including also the obtaining of government support.

12. WRAP UP
Conclusions
IIGF incorporates environmental risk mitigation in the heart of its operations with the belief that sustainable environment is inseparable from project continued success
While coal is not renewable energy, in 60% of the 35,000MW scale up program, environmental risk mitigation can still be pursued
IIGF also supports renewable energy through the provision of guarantee, and the associated support it provides to the improvement of the project