(Indonesia) the PREPARATORY SURVEY on SMALL HYDRO PROJECTS in SUMATRA and SULAWESI in REPUBLIC of INDONESIA Final Report
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Indonesia (Indonesia) THE PREPARATORY SURVEY ON SMALL HYDRO PROJECTS IN SUMATRA AND SULAWESI IN REPUBLIC OF INDONESIA Final Report February 2014 Independent Administrative Corporation Japan International Cooperation Agency Industrial Decisions, Inc. Hokuden Sogo Sekkei Co., Inc. OS JR (先) 14-005 TABLE of CONTENTS Chapter.1 Introduction ............................................................................................................ 5 1-1. Background of the Preparatory Survey Regarding the Small Hydro Power Project in Sumatra and Sulawesi ............................................................................................................... 5 1-2. The Aim of the Survey ....................................................................................................... 7 Chapter.2 Confirmation of the Current Status and Future Projections of Small Hydroelectric Power Projects in Indonesia .......................................................................................................... 8 2-1. Current status, Challenges and the Future Plan of the Indonesian Electricity Sector with Some Focus on Renewable Energy ........................................................................................... 8 2-2. Present Conditions and Challenges Facing the Electricity Sector and Future Development Plans with Some Focus on Renewable Energy of Sumatra .............................. 12 2-3. Summary of the Indonesian Laws Regulations, Policy and Structure Relating to Electricity Focusing on Renewable Energy and Public-Private Partnerships (PPP) ............... 16 2-4. The Objectives, Policies and Institutions of the Central and the Local Government for Financial Resource and Subsidy System of Renewable Energy Development with a focus on Small Hydro Power ................................................................................................................. 20 2-5. Interests and Trends of Domestic and Foreign Investors in Renewable Energy Development, Especially in the Small Hydroelectricity Sector .............................................. 22 Chapter.3 Selection Process of the Project ........................................................................... 25 Chapter.4 Outline of Conditions and Issues in the Finance Mechanism with Energy Fund . 26 4-1. Outline and Purpose of the Fund Establishment .............................................................. 26 4-2. Outlines of Investment Policies and Investment Area ..................................................... 38 4-3. Considerations on Fund Operation System ...................................................................... 44 4-4. Review of the Funding Scheme Including JICA Private Sector Investment Finance Scheme .................................................................................................................................... 46 4-5. Plans for Investing to Exit by Funds ................................................................................ 48 4-6. Consideration on Support Structure for Individual Project after the Execution of Investment by Funds ............................................................................................................... 49 4-7. Outline of Conditions and Issues Required for Fund Establishment ............................... 51 Chapter.5 Summary .............................................................................................................. 53 i List of FIGURES Figure 2-1 Trend of Gross Generation (By Fuel Type) ......................................................... 8 Figure 2-2 Volume of Oil Consumption and Supply ............................................................. 9 Figure 2-3 Estimated Composition of Generation Capacity by Fuel .................................... 9 Figure 2-4 Sumatra Grid System Development Plan .......................................................... 12 Figure 2-5 Forecast of Generation Capacity and Peak Load ............................................... 14 Figure 2-6 Generation Cost Comparison............................................................................. 15 Figure 4-1 Relationship between Development Stages and Risks ...................................... 27 Figure 4-2 Development Stages and Investment Target ...................................................... 40 Figure 4-3 General Fund Structure ...................................................................................... 44 Figure 4-4 Finance Structure Example with Utilization of Energy Fund ............................ 46 Figure 4-5 Flow of the Monitoring...................................................................................... 49 ii TABLES Table 2-1 Fast Track Programs ............................................................................................ 10 Table 2-2 Potential of Development of Thermal Power Plants ........................................... 10 Table 2-3 Development Potential of Hydro Power Plants (MW) ........................................ 11 Table 2-4 Each Province’s Electrification Rate in Sumatra Island(2012) ...................... 13 Table 2-5 Average Indexes in Sumatra ................................................................................ 13 Table 2-6 Power Development Plan in Bengkulu (2012 – 2021) ........................................ 15 Table 2-7 Modification from PR67th / 2005 to PR13th / 2010 ........................................... 16 Table 2-8 Negative Investment List in Power Sector .......................................................... 18 Table 2-9 FIT Pricing Structure ........................................................................................... 20 Table 2-10 Preferential Tax Treatment ................................................................................ 21 Table 2-11 Tax Treaty between Japan and Indonesia .......................................................... 21 Table 4-1 Characteristics of Infrastructure Fund Compared to Other Types of Funds........ 26 Table 4-2 Infrastructure Assets as Investment Target .......................................................... 27 Table 4-3 Asia Pacific Funds (India and China) .................................................................. 29 Table 4-4 Asia Pacific Funds (Southeast Asia).................................................................... 30 Table 4-5 Asia Pacific Funds (South Korea, Australia, Others) .......................................... 31 Table 4-6 North America Funds .......................................................................................... 32 Table 4-7 Central and South America Funds ....................................................................... 33 Table 4-8 European Funds ................................................................................................... 34 Table 4-9 Middle East Funds............................................................................................... 35 Table 4-10 Africa Funds ...................................................................................................... 36 Table 4-11 FIT Pricing Structure ......................................................................................... 38 Table 4-12 Development Potential of Renewable Energy in Indonesia (2011) .................. 38 Table 4-13 Merits and Demerits in Each Development Stage ............................................ 39 Table 4-14 Scope of Small Hydro Investment .................................................................... 41 Table 4-15 Merits and Demerits of Development Area ....................................................... 42 Table 4-16 Merits and Demerits of Developers .................................................................. 43 iii Glossary Abbreviation English Indonesian Agency for Assessment and Application Badan Pengkajian dan Penerapan BPPT of Technology Teknologi (BPPT) Engineering, Procurement and EPC Construction FIN Feed In Tariff FS Feasibility Study GP General Partnership GW Gigawatt IPO Initial Public Offering IPP Independent Power Producers JICA Japan International Cooperation Agency kW kilowatt kWh kilowatt-hour LP Limited Partnership M&A Merger and Acquisition Ministry of Energy and Mineral MEMR Resources MW Megawatt MWh Megawatt-hour ODA Official Development Assistance Indonesian Infrastructure Guarantee PT Penjaminan Infrastruktur IIGF Fund Indonesia PIP Pusat Investasi Pemerintah PLN State Electricity Company Perusahaan Listik Negara PPA Power Purchase Agreement PPP Public-Private Partnership SPC Special Purpose Company TWh Terawatt-hour iv Chapter.1 Introduction 1-1. Background of the Preparatory Survey Regarding the Small Hydro Power Project in Sumatra and Sulawesi The purpose of implementing the Preparatory survey (hereafter “the Survey”) regarding the small hydro-power project in Sumatra and Sulawesi (hereafter “the Target Project”) is to accelerate the development of the small hydro-power project in Indonesia. The Survey will be conducted according to the following viewpoints: business / project development plan of the Target Project, possibility of installing Japanese technology and equipment and possibility of utilizing funding (capital/loan). The Survey has been led to start as the electricity demand in Indonesia is soaring and the Indonesian government has considerable expectations for the development of the small hydro-power plants. Sumatra and Sulawesi islands have growing demand in particular (see 1-1-1 for details), leading to higher power purchase price