Bank aus Verantwortung

Financing PV/Solar Energy Projectsin Indonesia Paul Heinemann – Director DEG Office JakartaThorsten Schneider – Senior Project Manager KfW Office Jakarta

May 2014

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KfW Group - A promotional bank with a wide array of functions

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Developing and emerging-market

countries

Financial Cooperation

(Gov. to Gov.)Public Sector

International FinancingWe promote Germany

Promotion construction

of new housing and modernisation

as well as education

Promotion SMEs, business founders,

start-ups

Financing municipal infrastructure

projects and global loans Germany

agency business for Federal

Government

Domestic PromotionWe ensure

internationalisation

International project and

export finance worldwide

Public & Private Sector

Business area Mittelstandsbank

Business area Privatkundenba

nk

Business area Kommunalbank

KfW IPEX-Bank

KfW Entwicklungsbank

Developing and emerging-market

countries

Private Sector Promotion

DEG

Promotion of environmental and climate protection

We promote development

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DEG - Activities in Renewable Energy

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Renewable financing since to date:-USD 750 million in total-more than 40 projects globally

Financing of private sector investments with a positive development impact

30 % of annual commitments in climate protection projects including renewables

In depth-expertise in renewable energy built-up from a long track-record of projects globally, comprising hydro, wind, solar, biomass and geothermal

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DEG criteria for financing renewable energy/grid-connected solar/PV (private sector)

Financing›Equity ratio of appr. 30% with adequate cash-flow oriented structurePromoter/Sponsor› Sector experienced, being at risk› Corporate governance, transparencyConstruction›Implementation complexity relatively low, but EPC contract with completion and performance guarantees preferred›Arrangements to cover cost-overrun risksOperation›Experienced operator, long-term O&M contract›Proven technologies from well established manufacturers/suppliers with warranties/power output guarantees (insurance-backed)

Sales/Off-take›Solar still highly relying on subsidies›Regulatory Framework/Incentives (?):Feed-in tariff (obligatory dispatch) and/or long-term PPA (bankable, take-or-pay)›Creditworthiness of off-taker (commercial attractiveness to use solar)›Grid connection (who is responsible), grid management impactsEnergy Resource›Power generation estimation (solar radiation, planned losses etc.) to be confirmed by independent technical engineer same as adequacy of equipmentPermits/Licenses›All required permits, rights, licenses etc. in place including land

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Solar/PV in IndonesiaChallenges:›Initialized first tender of 140 MW very scattered

›Small-scale projects due to size difficult to be financed stand-alone as project finance

›Lack of solar-experienced players in Indonesia (e.g. JV local (permit) developer and int. experienced solar developer/investor)

Possible approaches:›Bundling of projects with funding via holding (scaling potential), debt or equity

›Initially on corporate balance sheet

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What we know:›Government targets to increase renewable proportion (however, not mandatory), other interests: increase electrification rate, substitute expensive diesel›Announced solar tariff (max. 0,25 USD/kWh, reverse auction), 20-y PPA›First tender of around 150 MW in pre-defined regions was initialized

What we still need to understand:›Current status?›Bankability of template PPA (e.g. take-or-pay?, curtailment risks)›Specific tender criteria/new concept (which/when)?

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KfW Development Bank - Financing Structures for the public sector Tailor-made implementation structures for different investment volumes

Utility Financial Intermediary

Government Government

(usually)big investments

(usually) many small investments

PLN

(usually)big investments

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1,000 Islands RE for Electrification Program, Indonesia Increase Electricity Access through RETs and Grid Expansion

› Situation at the Outset› Low electrification rate, particularly beyond Java-Bali grid structure

› Remote areas with electricity access relying primarily on diesel generation sets, despite abundant renewable energy resources

› Government priorities: a) increase electrification rate, b) increase RE share

› Approach› Support governmental efforts in expanding electricity access through least cost

RE technologies and grid expansion

› Objectives/ Impacts (pilot phase)

› Electricity access for 20,000 households

› Reduced GHG emissions and reliance on diesel

› Contribution of FC (pilot phase)

› KfW funds: EUR 65 mil. promotional loan

› Total costs: EUR 85 mil.

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Search KfW Tenders on Germany Trade and Invest http://www.gtai.de/GTAI/Navigation/EN/Trade/search-kfw-tenders.html

Bank aus Verantwortung

Contact

Thorsten SchneiderSenior Project Manager KfW (Energy)Thorsten.Schneider@KfW.de

Address:Menara BCA, 46th floorJalan M. H. Thamrin No. 1Jakarta 10310Indonesia

Phone: +62 21 23 58 74 31/41 Fax: +62 21 23 58 74 40

Jochen SalethDirectorKfW Office Jakarta Jochen.Saleth@KfW.de

Paul HeinemannDirectorDEG Office Jakarta Paul.Heinemann@deginvest.de