Building New Edge Synergy between PJB & Public Participation for Indonesia Electricity Development

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1 Building New Edge Synergy between PJB & Public Participation for Indonesia Electricity Development London March 15, 2018 Proper Emas (Gold Proper) is Indonesia highest prestigious award appreciating industry long-term contribution for safety and development of environment & social quality received by Paiton CFPP fully owned & operated by PJB

2 Presentation Outline A B C D Development of Electricity Sector PJB Contribution in The Industry Riau-2 CCGT Project Cooperation Opportunity

3 Presentation Outline A B C D Development of Electricity Sector PJB Contribution in The Industry Riau-2 CCGT Project Cooperation Opportunity

4 1 - Profile of Indonesia Electricity Sector THE INCREASING ELECTRICITY DEMAND 234 TWh 480 TWh (a) 21 GW 6.9 GW 8.6 GW 39.1 GW (b) 2.1 GW a. The electricity demand in Indonesia is forecasted to increase year by year b. To meet that increasing demand during , there will be 77.9 GW addition to the Existing Power Plant in Indonesia c. Detail COD target for each power plant project to be adjusted accordingly to actual growth of electricity demand Accelerated Program of Indonesia Government 1. Indonesian Government aims for an affordable and stable Electricity Cost to boost economic and social welfare 2. Indonesia Government also aims to promote and encourage green and locally available sources of primary energy 3. Electricity Sector Development becomes Top National Strategic Programs in Indonesia Source: Electricity Supply Business Plan of Indonesia

5 2 Electricity Regulation Framework In Indonesia Electricity Sector PPA IPP Procurement Presidential Reg. 14/ PLN has the right to assign its subsidiaries in IPP development with shares at least 51%. 2. The Subsidiary of PLN conduct partners selection. 3. Main criteria among other : financing support Local Content MOI Reg. 51/2012 as amended MOI Reg. 5/2017 Local content for CCGT power plant 100 MW MW 1. Goods : 30.67% 2. Services : 71.53% 3. Combined Good and Services : 34.76% Gas MEMR Reg.45/ MEMR determines the price of natural gas from upstream activities for powerplants 2. PLN or IPPs may purchase gas through pipeline at plant gate with ceiling price of 14,5% ICP Coal MEMR Reg. 19/ Direct appointment for mine mouth IPP is permitted 2. Ceiling tariff for mine mouth and coastal Coal Fired power plant Licence Acceleration of Licencing Process Under PR.14 of IUPTL (Generation Licence) : 3 days 2. Location Licence : 5 days 3. Environtmental Permit : 60 days 4. Borrowing Permit : 30 days 5. Building Permit : 5 days 6. Income Tax and VAT facility : 28 days MEMR Reg. 10/2017 as amended MEMR Reg. 10/ Changes in laws & regulations events are no longer mentioned as force majeure events which will relieve the affected party for performing its obligations under PPA 2. Removal of consequences for changes in law & regulations events (Previously under the first amendment of Reg. 10/2017, consequences for changes in laws event are limited to tariff adjustment in case such events cause additional investment or cost increase)

6 3 - Financing Equity Instruments for Infrastructure Government of Indonesia gives fully support for infrastructure development including electricity sector among others through several directions : a. Support from Government to PT PLN (Persero) among others : additional state investment, subloans & direct loans, incentives, restructuring, hedging, refinancing, minimum dividend payment ratio (Presidential Regulation 14/2017) b. Creative Funding (through financial instruments) is a new approach to optimzie fund available in the market to accelerate infrastructure projects Electricity & Investment Gain Investment Fund PUBLIC Utilities Company Common Company Pension Fund Insurance Mutual Funds Avaiable Equity Instruments : Criteria KIK-EBA (Asset Backed Securities) IPO (Initial Public Offering) RDPT (Mutual Funds for Special Purpose) DINFRA (Mutual Funds for Infrastructure Projects) Minimum Company Establishment Period 3 years 3 years No limitation No limitation Maturity No limitation No limitation No limitation No limitation Asset Guarantee Not required Not required Flexible (according to regulation) Flexible (according to regulation) Minimum Issuance Value There is no limitation 10% - 20% from Issuer s Equity > IDR 5 billion No limitation Rating Requirement Yes Not required Not required Not required Number of Investor No limitation Min investor Max. 50 investor No limitation

7 Presentation Outline A B C D Development of Electricity Sector PJB Contribution in The Industry Riau-2 CCGT Project Cooperation Opportunity

8 4 - PJB s Subsidiary & Affiliate Indonesia Gov. 100% PT PLN (Persero) 99.9% YPK PLN 0.01% PT PLN SC 51% PT NII 72.98% PT PJBI 99.9% PT RE 98.91% PT PJBS 98% PT S2P 49% PT BPI 29.15% PT BDSN 36.61% PT KPJB 49% PT SGPJB 30% PT RDM 10% PT MKP 92% : PJB Shareholders PT GHPJB 30% PT NSHE 25% PT REC 99.8% PT SKP 95% : PJB Direct Subsidiaries : PJB Non-Direct Subsidiaries : Associate Company

9 5 - PJB Portfolio & Pipeline Arun Asahan Tanjung Pinang Ternate Sorong Banda Aceh Batang Toru Sumut-2 Riau 1 Rengat Siberida Tanjung Jabung Banjarsari Duri Riau 2 TB. Karimun Sumsel 6 Jawa 7 M. Karang M. Tawar Tenayan Belitung Bangka Tj. Awar Indramayu Brantas Bawean Kalselteng 3 Rembang Pacitan Cilacap Amurang Kaltim Teluk Kalselteng 4 Kalselteng 5 Gorontalo Sulteng Pulang Pisau Suppa Kendari Tj. Jati B Jawa 3 Madura Bima NTT Ropa/Ende Bolok Taliwang Tidore Timika Gresik Paiton 1,2 : Owned By PJB Total Power Plant Capacity Currently Operated 15,646 MW 10,512 MW Total Power Plant Capacity Currently Developed : Participation in IPP : O&M by PJB : O&M by PJBS (Subsidiary PJB)

10 Presentation Outline A B C D Development of Electricity Sector PJB Contribution in The Industry Riau-2 CCGT Project Cooperation Opportunity

11 6 - Readiness of the Project Under the regulation, PJB subsidiaries will own minimum 51% of IPP shares PLN has secured gas supply in the regional While Duri-Dumai gas pipeline for the project to be finalized in 2018 PJB posses long term excellencence in gas power O&M Public participation is invited for equity investment through financial instrument Riau-2 CCGT 250 MW 1 Loan will be selected from competitive financier and ECA Land has been secured within industrial park Riau-2 CCGT is one of the accelerated projects under Electricity Supply Business Plan (RUPTL) EPC contractor will be selected through credible selection process : Owned by PLN : Owned by PJB : Open Tender : Public Participation

12 7 Virtual Visit to Riau-2 CCGT

13 8 - Project Financial Profile Cash Flow Projection Financial Assumptions 30 Project Cost USD 261,000, DER 80 : 20 Million USD 10 - (10) Equity IRR 12% - 14% NPV USD 79,979,000 PBP 6 Years (20) (30) Year : Construction Period : Repayment Period : Pre Construction : Capital Cost Recovery Stage I : Capital Cost Recovery Price Stage II PPA Period Construction Period 20 Years 28 Months Loan Interest 5.5 % Project Cost Equity Debt Technical Assumptions Local USD 28 Mio - Commercial Bank : USD 19 Mio - ECA : USD 57 Mio NPHR 1,746 kcal/kwh Foreign USD 24 Mio ECA : USD 133 Mio Gas Price $ 6,61 /MMBTU Total USD 52 Mio USD 209 Mio

14 Presentation Outline A B C D Development of Electricity Sector PJB Contribution in The Industry Riau-2 CCGT Project Cooperation Opportunity

15 9 - Overall Project Scheme Assignment from PJB to its wholly-owned subsidiary Utilitiy company, Common company, Insurance fund, Pension fund, Mutual fund, etc Foreign Investors Local Investors PT Pembangkitan Jawa-Bali Investasi 51% RDPT 49% Assignment to PJB PPA Min 20% Max 80% Commercial Loan Electricity Offtaker O&M Agreement Riau-2 CCGT 250 MW EPC Contract ECA Gas Supply Agreement O&M Company Subsidiary of PJB Gas Source & Required Gas Pipeline EPC Contractor * RDPT : mutual funds for special purpose

16 10 - Mutual Fund for Equity (RDPT) Foreign Investors Local Investors Commercial Loan Investment Management Max 80% RDPT Max 49% Custodian Bank Max 20% Min 80% Capital Market Project Shares Min 20% Min 51% Investment Committee Technical Advisor Appraiser PT Pembangkitan Jawa-Bali Investasi a. RDPT is secure investment instrument involving relevant professional parties in the process to ensure its credibility b. RDPT for Riau-2 CCGT will be listed under Indonesia Stock Exchange where investors could book through appointed Investment Managers c. During construction phase, Investors may receive some return from gain of capital market investment managed by Investment Manager d. After COD phase, holder of the unit of RDPT shall has the equal rights to the dividend of the project. e. Project is expected to have refinancing soon after COD. ECA Riau-2 CCGT 250 MW f. After certain agreed period, RDPT may exercise exit strategy. RDPT : Mutual Funds for Special Purpose

17 11 - Indicative Project Milestone No. Activities April May June July Aug. Sept. Okt. Nov. Des. Jan. Feb. March 1. Bid doc EPC 2. Pre Readshow 3. Due Diligence Investor 4. RFP IPP & Owner Estimate 5. Registration to OJK 6. RDPT listed in OJK 7. Roadshow to Investor 8. Official offer to Investor & LOI 9. IPP Proposal Submission 10. Proposal IPP Negotiation 11. Investor Negotiation 12. LOI IPP 13. JVC (Early) establishment 14. PPA signing 15. SHA & SSA Negotiation 16. SHA, SSA, & RDPT signing 17. EPC contract signing 18. Loan signing 19. RDPT Financial Close 20. NTP for construction Legend : IPP process stream : RDPT process stream 21. Project Financial Close

18 12 - Conclusion 1. Riau-2 CCGT (Project) would probably become one of the most interesting IPP Projects to be launched in Indonesia during RPDT to be issued for the Project shall become new edge of cooperation among PJB and public participation in broader sense. Moreover, this instrument will allow more benefits coming from : a. New wider basis of long-term investors, b. New alternatives of investment instrument, c. Providing higher benchmark level in terms of transparency and cost efficiency as well as competitiveness, d. Faster duration for project implementation 3. Currently, PJB is on going to prepare final detail structure of RDPT and execution strategy while also to continue IPP project stream tasks. 4. Through this IIIF 2018, PJB invite greater interests and feedback from investors, professionals and strategic stakeholders to establish RDPT for equity of the Project soon.

19 Thank You