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

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

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)

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 ).

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.

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

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

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

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

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

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.

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