Japan-Indonesia Business Forum
Renewables in Indonesia

Investment
BankingNov 2018

Zia Azeez
Deputy Head of Asia
Global Structured Finance
Investment Banking Department Asia

Disclaimer and Equator Principles
Disclaimer

Equator Principles

This presentation has been prepared by Sumitomo Mitsui Banking Corporation (“SMBC”) forthe purposes of presenting SMBC’s credentials in the renewable energy space.

Sumitomo Mitsui Banking Corporation is a signatory to theEquator Principles (“EP”) and as such we are required toensure that all projects that SMBC is involved in are EP
compliant.

Information in this proposal should not be construed as legal, regulatory, financial investment,
tax, or accounting advice. Recipients should make their own independent appraisal and/or risk
assessment of the information and consult their professional advisors before embarking on
any course of action.
Although the information is obtained from sources considered as reliable by SMBC, SMBC
makes no representation as to, and accepts no liability for any representations in relation to,
the accuracy or completeness of the information contained in this proposal or for any loss ordamage arising from the use of this proposal. SMBC has no responsibility to update any
information contained in this proposal. The contents contained in this proposal may change
without prior notice.
Nothing contained in this proposal is intended to be, nor should be construed as, a solicitationor an offer of any financial products, investments, financing or other banking facilities.
The offer of any credit facility and the structure to be used is subject to, among other things,
satisfactory due diligence results and approval of guarantor(s).
The contents of this proposal shall not be disclosed to any other party without SMBC’s priorwritten consent.

Sumitomo Mitsui Banking Corporation Singapore, incorporated in Japan with limited liability (Reg. No (UEN) T03FC6366F)

Copyright © 2018 Sumitomo Mitsui Banking Corporation. All Rights Reserved.

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Market Leader in Project Finance
SMBC is proud to have been awarded “Global Financial Adviser of the Year”, “Asia Pacific Financial Adviser of the Year”, “Latin America
Financial Advisor of the Year” and “MENA Financial Advisor of the Year” from IJ Global
Global Bank of
the Year 2017

APAC
Renewables Dealof the Year
Star Energy

Europe PPP Dealof the Year
Ikitelli HospitalInfrastructure Journal Awards
2017 Global MLA of the Year2016 FA of the Year (Global)

America / Middle
East & Africa
Bank of the Year
2016

APAC Power Dealof the Year
Central Java IPP

Mining Deal of theYear
Oyu Tolgoi

Power Deal of theYear
Salem Habour
GalloperFA of the Year (Asia Pacific)

LatAM Power Dealof the YearTEN

FA of the Year (Latin America)
FA of the Year (MENA)
2015 MLA of the Year (EMEA)PPP Deal of theYear
IJmuiden

2014 Asia Pacific Bank of the Year2012 MLA of the Year – Social Infrastructure
2011 Global MLA of the Year

Global Bank ofthe Year 2014

AP Deals of theYearRoy HillSarulla
PAU

2011 Arranger of the Year – Oil & Gas
Europe Deals ofthe Year

The Asset Triple A Awards
2017 Project Finance Advisory House of the YearAP Deals of theYear
Nghi Son Refinery
NSW Ports

Europe Deals ofthe Year
A1/A6 Motorway
Thameslink Rail

Project Finance House of the Year

Americas Deals ofthe Year
Sabine Pass LNG
Chaglla Hydro

Project Finance House of the Year (Australia)
Project Finance House of the Year (Japan)
2016

Global Bank ofthe Year 2012

AP Power Deal ofthe Year
Gulf U-Thai

Project Finance House of the Year Asia Pacific

AP Infra Deal ofthe Year
SydneyDesalination
Source: PFI, Infrastructure Journal
Copyright © 2018 Sumitomo Mitsui Banking Corporation. All Rights Reserved.

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Indonesia – A Key Market for SMBCSMBC is involved in
majority of the Project
Financing transactions inIndonesia

Up-to-date and in-depth
understanding of themarket

On-the-ground presence
via subsidiary SMBCI
which has about 500 staff

SMBC is a shareholder inIndonesian bank BTPN
(40%)

Invested in Indonesia
Infrastructure Finance(“IIF”) – along with IFC,ADB, DEG and Governmentof Indonesia

Copyright © 2018 Sumitomo Mitsui Banking Corporation. All Rights Reserved.

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Renewable Energy Experience in Indonesia
Indonesia

OngoingIndonesia

2018

Indonesia

2017

Indonesia

2017

Indonesia

2017

Indonesia

2017

Indonesia

2016

Hydropower
Project

Rantau Dedap
98.4 MW

Wayang Windu
227 MW

Tolo
72 MW

Muara Laboh85 MW

Chevron
Geothermal
AssetsAcquisition

Sidrap75 MW

Confidential

US$590 million

US$660 million

Confidential

US$440 million

Confidential

US$120 million

Financial Advisor

Mandated Lead
Arranger

Lead Arranger

Financial Advisor

Mandated Lead
Arranger

Mandated Lead
Arranger

Mandated Lead
ArrangerIndonesia

2016

Indonesia

2015

Indonesia

2015

Indonesia

2014

Indonesia

2014

Indonesia

2014

Indonesia

2012Hasang
39 MW

Semangka
56 MW

Samas
50 MW

Asahan180 MW

Sarulla321 MW

Meureubo 260 MW

Wampu IPP
45 MW

US$147 million

US$144 million

Confidential

US$280 million

US$1.6 billion

Confidential

US$131 million

Financial Advisor
Mandated Lead
Arranger

Financial Advisor

Financial Advisor for
PPA/Tariff Negotiation

Lead Arranger

Mandated Lead
Arranger

Predevelopment
Financial Advisor

Financial Advisor
Mandated Lead
Arranger

Hydro

GeothermalWind
Source: PFI, Infrastructure Journal
Copyright © 2018 Sumitomo Mitsui Banking Corporation. All Rights Reserved.

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Energy Mix - Move Towards Renewables▪ Coal fired power plants are likely to still be the dominant power generation
domestically and contribute more than 50% of the energy requirements by2027

2018 Composition of Electrical Energy
Production by Fuel In Indonesia(Total: 273,811GWh)
0.5%

6.9% 5.4%
0.2%

o Coal mine-mouth power plants remain integral to the plan, givenIndonesia’s large coal deposits

Geothermal
Other Renewables▪ Gas power generation to grow by contributing roughly 20.6% of total
electricity generation by 2027
o Plans extensive use of LNG for gas-fired power plants, However,given relatively higher cost of LNG, plans to use LNG as a peakload back-up rather than for base-load power plants▪ Share of oil based generation will reduce from 4.2% in 2018 to 0.40% by2027▪ Renewable energy is expected to post the strongest growth, from thecurrent c.10.50% contribution to ~20% by year 2027. Estimates for 2027
below:Hydro

20.8%

Gas

Fuel
Coal

62.0%

4.2%

Import2027 Composition of Electrical Energy
Production by Fuel In Indonesia(Total: 501,918GWh)
0.0%

o 49,201 GWh of Geothermal

9.3%
9.8%

o 46,700 GWh of Hydro

HydroGeothermalo 6,631 GWh of other types of renewable energy

1.3%

Other Renewables
Gas

Hope is for expedited IPP tendering process toachieve generation targets

RUPTL 2018-2027

Fuel

58.6%

20.6%

Coal
Import0.4%

Source: 2018 – 2027 RUPTL
Copyright © 2018 Sumitomo Mitsui Banking Corporation. All Rights Reserved.

5Key Challenges for Renewables
New Tariff Regime for
Renewable Projects▪ New Regulation 12 has attempted to push the renewable tariff closer to existing average cost of production (“BPP”)▪ Depending upon the local BPP of the region (determined by energy mix), the renewable sources (Solar, Wind etc.)
would potentially be benchmarked against the other cheaper sources of energy

Allocation Of Projects▪ Confusion around allotment of projects (Auction v/s Reference Price v/s Direct Selection)

MEMR Regulation 10▪ MEMR has set out some broad principle for risk allocation under PPA which have raised bankability concerns for
future projects e.g. treatment of Government FM, Take or Pay commitment limited to debt servicing period, allprojects to be on BOOT basis, currency convertibility risk staying with Project etc▪ Whilst the above are not applicable for renewable projects, it appears that it is applied for renewables as well

Land Acquisition▪ Land acquisition continues to be a concern

Grid Connectivity▪ Integrating vast amounts of renewables capacity into the grid will require greater investment in the network

Copyright © 2018 Sumitomo Mitsui Banking Corporation. All Rights Reserved.

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Financing Considerations
12
Bankable PPA withavailability based
payments

Sponsors with strong
experience/track record

83

Adequate financing
structure – Gearing,PRI, tail, DSCR, DSRA

Robust regulatory
regimePowerProjectsIndonesia
7 Satisfactory fuel supply
arrangement/ onsite datafor renewable energy
projects

4
Proven technology –Top tier suppliers

65Permits/LandAcquisition as a CP

Reputable contractor –Multiple contractors
can be considered

Copyright © 2018 Sumitomo Mitsui Banking Corporation. All Rights Reserved.

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Financing ParticipantsMultilaterals/DFIs/ECAs

Commercial Banks/InstitutionalInvestors

Institutional Investors/ Funds

Multilaterals/DFIs/ECAs are activein the market and also provide
Political Risk Coverage
✓JBIC
✓ADB
✓IFC✓MIGA
✓OPIC
✓FMO
✓Proparco✓KfW✓ Japanese Banks• SMBC, BTMU, Mizuho✓ European Banks• BNP, Soc Gen, Natixis,
Credit Agricole, ING,
HSBC etc.
✓ Regional Banks• KDB, DBS, OCBC,Maybank✓ Local Banks• Tend to have higher $pricing and tenor
restrictions✓ Institutional investors (FIs)• Eastspring, Clifford Capital,
Deka Bank✓ Indonesia Infrastructure Fund(“IIF”)✓ Renewable focused PE Funds• ReEX• Berkeley• Armstrong• Vena Energy

Extremely keen to support
renewable and gas fired projects

Liquidity available forrenewable projects:FIs can provide fixed rate financing
without any PRI cover✓Credit Enhancement✓Potential Equity/Mezzanine✓Require Political Risk Cover✓Longer Tenors possible

Active fund space for developers
to tap on equity financing

Copyright © 2018 Sumitomo Mitsui Banking Corporation. All Rights Reserved.

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Indonesia Renewables Case Study: Wampu Hydropower
Wampu Hydropower Project Financing

The Project•

45 MW, run-of-the-river hydroelectric project in Indonesia developed by aconsortium of Korea Midland Electric Power, PT Mega Power Mandiri andPOSCO Engineering are the Sponsors.

SMBC Roles•

Financial Advisor, Mandated Lead Arranger, Hedging Bank, Account Bank,Security Agent and Facility Agent.

•SMBC was actively involved in the bilateral negotiations with PLN.

•Total project cost was USD 175 million and was financed in a gearing ratio of
75:25.
Debt financing of about USD 130 million was financed by• KEXIM providing USD 72 million direct loan and• SMBC providing USD 58 million commercial loan under thecomprehensive cover from KEXIM.

FinancingStructure•

Financial Advisor, MLA,Hedging Bank, Account Bank
USD130 million
1st Power Project In Indonesia to close under the BVGL structure

Copyright © 2018 Sumitomo Mitsui Banking Corporation. All Rights Reserved.

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Indonesia Renewables Case Study: Rantau DedapRantau Geothermal Project Financing•98.4 MW, dual flash geothermal plant in Indonesia developed by a consortium ofMarubeni Corporation, Tohoku Electric Power and PT Supreme Energy.

•The project is located in the South Sumatra Province.

SMBC Roles•

MLA, Hedging Bank, Inter-creditor Agent.

FinancingStructure•Total project cost was USD 701 million funded in a debt to equity ratio of 77:23.

•Debt amount of ~USD 540 million was financed with limited-recourse debt from:The Project•

MLA, Hedging Bank,Intercreditor Agent•JBIC direct loan of ~USD 189 million•ADB direct loan of ~USD 175 million•

ABD CTF of USD 50 million•

Commercial banks including SMBC, Mizuho and MUFJ remaining debtof ~USD 126 million under the comprehensive cover from NEXI (90%CRI+100% PRI)

Tenor of BVGL is 15 years vis-à-vis loan tenor of 20.5 years, this was accepted
based on higher DSCR post expiry of BVGL.

USD540 million

Copyright © 2018 Sumitomo Mitsui Banking Corporation. All Rights Reserved.

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Contact Us
Sumitomo Mitsui Banking Corporation, Investment Banking Asia
3 Temasek Avenue# 12-01 Centennial Tower
Singapore 039190

Zia Azeez
Deputy Head
Global Structured Finance
Investment Banking Department Asia
DID: +65 6882 0233
E-mail: zia_azeez@sg.smbc.co.jp

Jeanne Soh
Head of Power & Infrastructure
Global Structured Finance
Investment Banking Department Asia
DID: +65 6882 0190
E-mail: jeanne_soh@sg.smbc.co.jp

Rakhi AnandFirst Vice President
Power & Infrastructure
Global Structured Finance
Investment Banking Department Asia
DID: +65 6304 0992
E-mail: rakhi_anand@sg.smbc.co.jp

Copyright © 2018 Sumitomo Mitsui Banking Corporation. All Rights Reserved.

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