KfW To Provide EUR 300 Million Loan To Indonesia’s Energy Sector

On behalf of the Federal Ministry for Economic Cooperation and Development (BMZ), KfW signed a financing agreement with the Indonesian Ministry of Finance for a promotional loan of EUR 300 million for the Sustainable and Inclusive Energy Programme (SIEP, Phase III). With the help of the German contribution, further necessary reforms in the Indonesian energy sector have been and will be initiated and implemented. SIEP supports the agenda of the Just Energy Transition Partnership announced at a side event to the G20 summit, which will provide Indonesia with long-term support for an accelerated energy transition.

The financed package of measures includes reforms to promote renewable energies, such as improved price mechanisms for feed-in tariffs, regulation for rooftop solar power systems, or more ambitious energy efficiency standards.

The promotion of greater private sector participation, in particular in the expansion of renewable energy sources, was also promoted. This was initiated by the Indonesian government, among other ways through improved guidelines for electricity transmission by private companies, a uniform model of electricity offtake agreements, and the review of the electricity tariff system.

The package of measures also led to improved performance capacity of the state-owned energy supplier PT.PLN, among other ways by means of more reliable revenues. The reforms and incentive mechanisms will make a decisive contribution in the future to significantly increase the share of electricity generation from hydropower, solar and wind energy, as well as geothermal energy. PT.PLN has the state mandate that more than 50% of the capacity added by 2030 will be fed in from renewable energy sources.

“We are helping Indonesia to develop the energy sector sustainably and in a climate-friendly manner in order to secure a long-term and cost-efficient electricity supply for all sections of the population. The expansion of renewables is coming at a time when there are ideal conditions in Indonesia. Due to its geographical location, high solar radiation, long coastlines, and geothermal activities, the island state meets the ideal prerequisites for the expansion of renewable energies,” said Christiane Laibach, Member of the Executive Board of KfW Group.

In addition to the German Federal Government, the Asian Development Bank as the main financier (USD 515 million), and the Korean government (USD 60 million) supported SIEP III financially and in terms of the programme. The contributions made available through KfW for SIEP I amounted to USD 200 million in 2015 and EUR 200 million for SIEP II in 2017.