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Investing in Indonesias

Hydro Energy sector


An overview of opportunities, capabilities
and provisions

Version: December 2015

2015 by Indonesia Investment Coordinating Board (BKPM). All rights reserved


Contents

An introduction 3

Why Indonesia? 4

Market opportunities 5

Existing and future capabilities 20

Government provisions and support 29

6 good reasons to invest in Indonesias Hydro Energy sector 37

The Investment Coordinating Board of the Republic of Indonesia


2
An Introduction
Indonesia has tremendous and abundant opportunities for investment in its
energy industry.

With a growing population of more than 250 million people, an increasing


proportion of which is living in dense urban areas, Indonesias need for new,
clean and sustainable sources of energy has never been greater.

Supporting this market opportunity, Indonesias capabilities and activities in hydro


power are growing, as is the level of support being provided by the Indonesian
Government and its supporting authorities to ensure both the country and
investors can benefit from the advantages of hydro energy.

The Investment Coordinating Board of the Republic of Indonesia


3
Why Indonesia?
Having abundant water resources really strengthens Indonesias position as an attractive
location for hydropower investment. Indonesia provides market opportunities, the right
capabilities and a supportive regulatory framework with attractive incentives and provisions:

MARKET EXISTING & FUTURE GOVERNMENT


OPPORTUNITIES CAPABILITIES PROVISIONS & SUPPORT

75 GW of hydropower capacity Established and growing National target to generate 26


potential, split as follows: specialised hydropower talent hydropower projects across
o Java - 12.05 GW pool Indonesia
o Sumatera - 16.1 GW Growing number of existing Up to 95% foreign capital
o Sulawesi - 14.55 GW and potential foreign and ownership for power plants
o Kalimantan - 5.9 GW domestic investors in hydro above 10 MW, 100% foreign
o Maluku - 21.05GW power ownership in PPP scheme.
o Bali-Nusa Tenggara - 4.9 GW Available and competitive Maximum foreign ownership of
Electricity demand is increasing labour force in hydropower 49% for power plants of 1-10
by 8% p.a. MW.

Sources: PLN, Ministry of Energy and Source: BKPM


Mineral Resources and PwC report Source: Financial Times
The Investment Coordinating Board of the Republic of Indonesia
4
Market Opportunities

2014 by Indonesian Investment Coordinating Board. All rights reserved


Why Indonesia?
Indonesia has abundant renewable energy resources from large-scale geothermal to small-scale
solar energy. One of the most promising sectors for development is hydropower. Not only it is the
cheapest renewable energy to develop, the generation of hydropower will not result in water
pollution or greenhouse gas emissions.

The potential for hydropower in Indonesia is approximately 75,000 MW. To date, only 7,572 MW of
the small hydro potential is currently utilized. In line with the Presidential Regulation No 5/2006
regarding National Energy Policy, the government will take measures to add the capacity of
mini/ micro hydro power plants in order to achieve the overall 35 GW energy target set by the
Government.

Sources: PLN, MEMR


The Investment Coordinating Board of the Republic of Indonesia
6
Why Indonesia?(continued)

Fourth most populous


Abundant natural
country in the world with
resources across the country:
large demand for electricity
483 rivers
87 lakes

Government support to
Increase utilization of
renewable energy, new
regulation requires PLN to
purchase renewable
based-electricity with
capacity up to 10 MW.

Huge potential and increase Emerging economy, robust GDP


in demand, only small growth, low current rate of
percentage is currently electrification.
utilized.

Sources: MEMR
The Investment Coordinating Board of the Republic of Indonesia
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Indonesias Growing Energy Demands 2012-2021
and Investment Required by PLN in Energy

Java and

Bali :

Electricity demand is forecast to increase 8 times over the next decade according to the Coordinating
Minister of Maritime in November 2014 (*)

By 2031, its estimated that an additional 237 GW will need to be added to the current capacity.

Electricity demand in Java, Bali will grow by 7.8% P.A,while demand in Eastern & Western parts of
Indonesia to grow by 11.4% and 10.5% respectively.

PLN will need annual investment of USD 8 bn per year to meet the demand. IPP is endorsed &
encouraged where investment might peak in 2016 with USD 42 bn.
Sources: *: PLN, www.kabarenergi.com/berita-pertumbuhan-kebutuhan-listrik-di-indonesia-capai-8-per-tahun.html
The Investment Coordinating Board of the Republic of Indonesia
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Global HydroPower Development in 2014

Global Hydropower generation in


2014 was an estimated 3.750 TWH.

About 40 GW of new hydropower


capacity was commissioned in 2013
increasing total global capacity by
around 4%.

Most capacity was established in


China (29 GW) with significant
capacity also added in Turkey,
Brazil, Vientam, India and Russia.

Growth in the industry has been


relatively steady in recent years,
fueled by Chinas expansion.

Sources: KPMG Global Tax Energy Report 2014 The Investment Coordinating Board of the Republic of Indonesia
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Global New Investment in Renewable Projects & Fuels and
Asset Finance of Renewable Energy Assets by Sector

In 2013 total investment in


renewable power and fuels
(excludng large hydro electricity
program) fell for the second year
running, reaching USD 214 Billion
worldwide. This figure is 14% lower
than 2012 and 23% below the 2011
record.

A major performer among


investment types was public market
equity raised by renewable energy
companies. This jumped 201% to USD
11 billion, the highest since 2010.

Asset finance of small hydro is at US$


4.7 Billion and ranks at # 4 after
wind, solar, and biomass and waste.

Sources: KPMG Global Tax Energy Report 2014 The Investment Coordinating Board of the Republic of Indonesia
10
ASEANs Population Access to Energy

Access to modern energy services is low in South East Asia relative to most other
parts of the world, with the exception of Brunei Darussalam, Malaysia, Thailand
and Singapore.

Indonesia accounts for almost half of the population of those living in the region
that lack access to electricity.

Electrification rates are also low in Cambodia (34%) and Myanmar (49%).

Source: IEA Southeast Asia Energy Outlook 2013 ,


The Investment Coordinating Board of the Republic of Indonesia
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ASEAN GDP Forecast & Indonesia Renewable Energy Target
Indonesias GDP remains the strongest
among ASEAN member countries. Its
GDP is forecast to stay strong due to
strong domestic consumption and
growth.

Indonesia plans to increase electricity


access to 99% of households by 2020.

The Government is planning to develop


hydro power plants with a combined
generation capacity of 16,799 MW, with
mini/micro hydro power set to reach 500
MW of capacity by 2025.

Hydro-based power has become the


highest priority for energy development
in the country under the current
administration.

Source: IEA Southeast Asia Energy Outlook 2013 ,


The Investment Coordinating Board of the Republic of Indonesia
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Countrywide Investment Opportunities for Electricity
Available

The Government has set a target to attract USD 96 Billion of investment by 2020,
comprising USD 68 Billion for power plants, USD 15 Billion for the development of
transmission and substations and another USD 13 billion for distribution.

Source: PLN
The Investment Coordinating Board of the Republic of Indonesia
13
Indonesias Hydro Power Potential and Realized
Capacity in 2013 (MW) *

Small Scale ( < 10


Big Scale ( > 10 MW) Total
Location MW)
Potential Realized Potential Realized Potential Realized
Sumatera 16,100 1,154 281.76 83.44 16,381.76 1,237.44
Java 12,050 2,012.5 222.32 212.32 12,272.02 2,224.82
Kalimantan 5,999.5 30 277.75 31.27 6,277.25 61.27
Sulawesi 14,550 352 167.56 118.05 14,717.56 470.05
Bali-Nusa 4,900 0 31.64 12.25 4,931.64 12.25
Tenggara
Maluku 21,057 23 32.78 4.67 21,089.78 27,67
Total 74,656.5 3,571.5 1,013.5 462 75,670 4,033.5

Huge and abundant water resources across the country have placed Indonesia as one of top
countries in the world for hydro power plant investment

Maluku, Sumatera and Sulawesi are the top 3 of potential hydro power locations within the
country.

Source: PLN, Ministry of MEMR The Investment Coordinating Board of the Republic of Indonesia
14
Indonesias Potential and Realized Hydro Power
Projects Based on PLNs 2013-2022 Plan (MW)
ACEH (50 MW ) NORTH SUMATERA (84 MW ) SOUTH SULAWESI (282 MW )
1. LAWE MAMAS (50 MW) - 2016 1. WAMPU (84 MW) 1. MALEA (182 MW)
2. BONTOBATU (100 MW)
3. KARAMA (800 MW )

MALUKU (30 MW)


1. MALA-2 (30 MW) - 2020

BENGKULU (29 MW)


1. SIMPANG AUR (29 MW) - 2014

Contact Person WEST JAVA (76 MW )


PT Perusahaan Listrik Negara
Mr. Hernadi Buhron | Kepala Divisi Pengadaaan IPP 1. RAJAMANDALA (58 MW)
2. CIBARENO -1 (18 MW) - 2020 Potential projects = in black
Jl. Trunojoyo Blok M1/135, Kebayoran Baru,
Jakarta 12160
P: +62 21 725 1234 ext. 1041 Implemented projects = in brown
F: +62 21 725 1511
E: hernadi.buhron@pln.co.id, www.pln.co.id

Source: PLN The Investment Coordinating Board of the Republic of Indonesia


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Available investment project opportunities:
Hydro Power Generator at Jati Gede , Sumedang West Java

Location: Sumedang, West Java

Size of land: 90 ha

Estimated cost: USD 224 milion

Potential power generated: 2 x 55 MW

Targets to be established: power house,


water ways, surge tank, penstock, tail
race, transformation yard, swithcyard,
and transmission line

Target of operation: 2019

The power once established will be under


the 150 KV Java and Bali grid system.

The Investment Coordinating Board of the Republic of Indonesia


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Available investment project opportunities:
Hydro Power Generator at Karama, South Sulawesi

Location: Mamuju Region,


West Sulawesi

Prospective area: N/A

Estimated cost: USD 1.3 B

Current electricity
consumption in South
Sulawesi is 1,317 MW with a
deficit of 1,164 MW

Potential power generated:


112.5 X 4 MW

The Investment Coordinating Board of the Republic of Indonesia


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Existing and Future Capabilities

2014 by Indonesian Investment Coordinating Board. All rights reserved


The Corporate Landscape
Indonesia already hosts a dynamic cluster of foreign and domestic
companies operating in the hydro power sector

The Investment Coordinating Board of the Republic of Indonesia


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What are investors and hydro power sector leaders
saying?
As Japan's policy-based financial institution, JBIC will continue
to support overseas business deployment of Japanese
companies and contribute to maintaining and strengthening
the international competitiveness of Japanese industries, by
drawing on its various financial facilities and schemes for
structuring projects, and performing its risk-assuming function.
Hiroshi watanbe, JBIC President

Together with NKE groups proven strong project management,


engineering and construction capabilities, we expect to deploy our
capital rapidly to deliver high-quality mini-hydro assets to support
sustainable development of Indonesia,
Michael McNeill, Partner, Armstrong Asset Management

Voith has been awarded the contracts for the supply of the
electro-mechanical equipment of two small hydropower projects
in Indonesia being an important success in the promising
hydropower market of South East Asia. The contracts have been
awarded by energy producer PT Medco Power.
Hubert Lienhard, President & CEO

The Investment Coordinating Board of the Republic of Indonesia


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Investor case studies:
Andritz Hydro (Austrian Company)
Andritz Hydro has delivered the electro-mechanical equipment,
including eight Francis turbines, generators, valves, transformers,
and control system for the Cirata hydropower plant located in
West Java, Indonesia.

The Cirata hydropower plant is Indonesias largest hydropower


plant, forming the backbone of the Indonesian grid.

Customer: PT-PLN (State Owned Electricity Company)

Indonesias largest operating hydroelectric power plants Cirata I


& II, with a combined output of 1,000 MW, were also
constructed by Andritz Hydro in 1984 and 1994.

As renewable and especially hydropower energy projects


are gaining momentum in the Indonesian energy sector and
the energy matrix is in the process of diversification, new
business opportunities will come about not only in the most
populated and industrial island of Java but also in large and
energy-intensive mining projects in remote regions such as
Papua, Kalimantan and Sulawesi.

The Investment Coordinating Board of the Republic of Indonesia


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Investor case studies:
Medco Power & Voith GMBH (German Company)

Voith has been awarded the contracts for the supply of the
electro-mechanical equipment of two small hydropower
projects in Indonesia a successful example demonstrating
Southeast Asias promising hydropower market.

The two plants Pusaka I and III will be installed in the province of
West Java and have a capacity of 8,8 MW and 3 MW. The
contracts have been awarded by PT Pembangkitan Pusaka
Parahiangan, a subsidiary of the Indonesian energy producer PT
Medco Power.

Voith will deliver the complete electromechanical equipment


including the four turbines and generators, the automation
systems as well as other balance-of-plant equipment. The
turbines will be manufactured by Voith Hydro in India at their
state-of-the-art small hydro manufacturing facility in Vadodara,
Gujarat.

The two small hydro power plants will contribute to the


absolutely essential expansion of electricity supplies in
Indonesia.

The Investment Coordinating Board of the Republic of Indonesia


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Investor case studies:
Royal Haskoning DHV (Dutch Company)

Royal HaskoningDHV is implementing four mini hydropower plants


along the Merawu river in Central Java, Indonesia. The project
consists of four cascaded run-of-river plants: 6 MW at Kerekan and
Pandensari, 2.4MW in Watupayang and 1.2 MW in Tempuran.

The powerhouses will each contain several turbines, and a


transmission line will connect about 400,000 people to the 20 kV
grid. Whats more, the four mini hydropower plants represent the first
phase in the agreement with TIRASA* to develop small scale
hydropower plants. The $30 million programme expects a return on
investment over seven years.

This is the first stage in our program to provide a total installed


capacity of 100 MW by 2018, said Mr Suryana Padma, president-
director of TIRASA, a local partner in Indonesia. These hydropower
plants provide a sustainable solution to the lack of supply
experienced in Indonesia.

The project started on July 2014. When complete, the quartet of


hydropower plants will provide a sustainable source of energy for
11,000 households.

* TIRASA (short for PT Bhakti Putra Bangsa, is a pioneering renewable energy developer

The Investment Coordinating Board of the Republic of Indonesia


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Associations, institutes and centres of excellence

Organisations supporting Indonesias hydro power sector are growing


in prominence, as are academic centres of excellence

Asosiasi Pengembang Pembangkit Listrik Tenaga Air


Sumatera Utara

The Investment Coordinating Board of the Republic of Indonesia


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Associations, institutes and centres of excellence
Association of Hydro Power Developers of North Sumatera

The private sector in North Sumatera established an organization to promote the


development of hydro power plants across the province. This organization meets
regulalry and provides input to the provincial and central Governments for simplifying
the processes and licenses of hydro power plant development in the province.
http://appltasu.org

Universitas Gadjah Mada, along with the Ministry of Energy and Mineral Resources, have
worked together to provide research on renewable energy and prepared examples like
villages for renewable energy across Indonesia. The University and the Ministry conduct
education programs in Indonesia to reduce fuel fossil energy and has focused on micro
scale hydropower with high technology since 2014. The University has also worked with
foreign entities like The New Zealand Government in conducting research on renewable
energy in Indonesia.
http: ugm.ac.id
The Investment Coordinating Board of the Republic of Indonesia
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Associations, institutes and centres of excellence

As a leading university in Eastern Indonesia, Universitas


Hasanuddin has conducted research and development in the
field of renewable energy such as hydro, solar, fossil fuel and
efficient building management and system to reduce energy
consumption. This University has worked with various
development agencies and leading R&D centers across the
world for better renewable energy innovation.
http://unhas.ac.id

The students of the Institut Teknologi Bandung have been


developing micro hydro power plants since 2008. They have
helped communities in small villages to get electrity in their
streets and houses in West Java and surrounding areas. The
alumni of the University have also formed clubs of hydro
power engineers to maintain close communications and
updates among themselves.
http://itb.ac.id

The Investment Coordinating Board of the Republic of Indonesia


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Government Provisions and Support

2014 by Indonesian Investment Coordinating Board. All rights reserved


Paving the Way for a New Era of Investments in Hydro Power
Based on the Latest Presidential Regulation No. 39/2014

The Indonesian Government and other supporting institutions have


established a host of provisions and incentives designed to encourage and
facilitate foreign investment in Indonesias hydro power sector, namely

95% foreign 95% foreign


49% foreign
investor ownership investor ownership
investor ownership
for power option for electricity
for power
generation > 10 MW transmission,
generation from
or 100 % ownership distribution and
1-10 MW
with PPP scheme supplying companies

Guaranteed feed-in
Power Purchasing tariff up to Rp 656
Agreement (PPA) /kWh for medium
established to ensure voltage and up to
purchase of hydro Rp 1,004/kwh for
power low voltage
*Subject to location

The Investment Coordinating Board of the Republic of Indonesia


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Feed-In-Tariffs for Hydro Power Plants
Based on MEMR Regulation No.19/2015
River flow 10 MW: Dam existing 10 MW:

Medium Voltage: Medium Voltage:


cent US$12/kWh ( 1st year to 8th year) cent US$ 10,8/kWh ( 1st year to 8th year)
cent US$7,5/kWh ( 9th year to 20th year) cent US$ 6,75/kWh ( 9th year to 20th year)

Low Voltage: Low Voltage:


cent US$14,4/kWh ( 1st year to 8th year) cent US$ 13/kWh ( 1st year to 8th year)
cent US$9/kWh ( 9th year to 20th year) cent US$ 8,1/kWh (9th year to 20th year)

Adjustment from the last regulation EMR Ministerial


Decree Number 22 Year 2014; (Hydro Power 10 MW):

Medium Voltage:
cent US$ 9,3

Low Voltage:
cent US$ 11

Source: MEMR, November 2015


The Investment Coordinating Board of the Republic of Indonesia
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Key organisations:
Ministry of Energy and Mineral Resources (ESDM)
The Renewable Energy dan Energy Conservation is a part of
the Ministry of Energy and Natural Resources (ESDM) which
was established in 2010.

It is tasked to formulate and implement policy for renewable


energy and energy conservation for Indonesia. This
Directorate is also tasked with providing electricity to remote
locations across the country through the usage of micro
hydro, solar, bio mass and bio gas commodities,where
Indonesia is rich and abundant with.

Since President Joko Widodo became President in October


2014 he has endorsed and pushed for renewable energy
development and project across Indonesia. He has targeted
the development of 35,000 MW of power until 2019.

http://www.esdm.go.id
http://ebtke.esdm.go.id

The Investment Coordinating Board of the Republic of Indonesia


30
Key organisations (continued):
Ministry of Research and Technology (RISTEK):

RISTEK supports the formulation of national policies and implementing


coordination in the field of research, science and technology. RISTEKs
Energy Programme is one of the ministrys six focus programmes. Its objective
is to contribute to a sustainable energy supply through the creation and use
of new and renewable sources energy. http://international.ristek.go.id

Agency For The Assessment & Application Of Technology (BPPT):

BPPT was established in early 1974 as a non-departmental government


agency under the coordination of RISTEK. It publishes the Indonesia Annual
Energy Outlook Book. It has assisted Central and South Kalimantan provinces
in conducting weather modification to fill up the dam for hydro power
station in the above provinces. http://www.bppt.go.id

State Electricity Company (PLN):

PT. PLN (Persero) is Indonesias state-owned Electricity Company and the


single buyer for all power generation projects. In 2011, a Power Purchasing
Agreement (PPA) came into force which obliges PLN to purchase electricity
from all future tenders of hydro power generator in Indonesia.
http://www.pln.co.id

Source: News from Berita Headline (2014)


The Investment Coordinating Board of the Republic of Indonesia
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A wide range of incentives are available
TAX TAX IMPORT DUTY
ALLOWANCE HOLIDAY FACILITY

Government
Ministry of Finance Regulation Ministry of Finance Regulation
Regulation
No. 159/PMK.010/2015 No.176/PMK.011/2009
No.18/2015

A variety of sectors are covered in On machines and materials used for


30% of investment value
this Regulation. production purpose

Period of tax holiday: 5 -15 years 2 years import duty exemption or 4


Reduction of corporate net income
(Previously it was for 10 years but it is years for companies using locally-
tax for 6 years, at 5% each year.
being extended for up to 20 years). produced machines (min. 30%).

Industries that produce goods


143 business segments
and/or services, including:
Tourism and culture
Specific requirements are: Minimum amount of investment is:
Public transportation
Minimum amount of investment IDR 1 Trillion
Public health services
value
Mining
Minimum number of workforce Ratio of tax holiday: 10 100%
Construction
Specific project locations,
Telecommunication
especially outside of Java
Port

BKPM will provide further advice on which specific incentive(s) are applicable for your
planned hydropower-related investment
Source: BKPM (2015)
The Investment Coordinating Board of the Republic of Indonesia
32
Key Legislation:
This slide provides a concise summary of the key legislation governing
investment in Indonesias hydropower sector. BKPM can provide you with
further details on specific pieces of legislation.
Law No. 30/2009 on Electricity:
The Law states that the Government to prepare Regional Electricity Plan (RUKD) based on National
Electricity Plan (RUKN). The Law states taht regional authority can provide licenses for power projects
which are intra agency and do not involve the sale of electrciity to holders of a Central Government
issued license and also Central Government approves tariffs for IPPs.

Government Regulation No. 42/2012 Cross Border Sale and Purchasing:


This Regulation governs the sale and purchase of power across Indonesias border and stipulates a permit
is required from the Minister. This Regulation enables the Government of Indonesia to purchase electrcity
from other countrie to Indonesia should there be a deficit on electricity on certain locations in Indonesia.

Law No. 2/2012 on Land Acquisition


The Law aims to expedite land acquisition process for certain infrastructure projects including power plant.
Central Government now could push for faster land acquisition with the Local Government .

Presidential Regulation No.40/2014 further on Land Acquisition.


This Regulation states that for land below 5 Ha can be directly purchased by the business entitiy and land
owner. Also this Regulation states that Local Government can provide fund from local budget to purchase
land.

The Investment Coordinating Board of the Republic of Indonesia


33
Key Legislation:
This slide provides a concise summary of the key legislation governing
investment in Indonesias hydropower sector. BKPM can provide you with
further details on specific pieces of legislation.
Regulation from Minister of Energy and Mineral Resources No.4/2012 on Purchasing Price from Renewable
Energy Power :
The authorised time limit for geothermal development following the issuance of a permit was extended, in
the event that exploitations have not yet begun. The purpose of this regulation is to provide a conducive,
fair and transparent business climate for geothermal development. It also provides business assurance
where the Government determines the buyer and highest electricity price before development.

Government Regulation No. 62/2012 Electricity Support Business


This Regulation provides opportunities for Regional Government and other entities to participat in
providing support for electricity business. Ministry of Energy and Natural resources would provide
certification and accreditation for electricity support business in consulting, development, operation,
inspection, maintenance, research and training and laboratorium for equipment design.

Regulation from Minister of Energy and Mineral Resources No. 3/2015- Purchasing procedure on electricity
price from various power plants such as steam power plant, gas power plant, coal and hydro power plant
through direct selection and appointment. PLN will prepare the ISO (International Organization for
Standarization) and IEC (International Electrotechnical Commission). Ministry of Energy and Mineral
Resources will also focus and consider the local content for all electricity equipment to be utilized in
Indonesia.

The Investment Coordinating Board of the Republic of Indonesia


34
Six Good Reasons to Invest in Indonesias Hydropower
Sector

Unsurpassed hydro Increasing demand


power potential: for clean, Strong existing
40% of sustainable energy ecosystem of hydro
global reserves among Indonesias power centres of
booming excellence and
(Ministry of Energy and population of 250 R&D facilities
Mineral Resources) million and growing

Demonstrable
government support
Proven investment Up to 95% foreign
through increased
success stories in ownership options in
hydro power price,
Indonesias hydro various hydropower
tax holidays / relief
power sector operations
and risk exploration
fund

The Investment Coordinating Board of the Republic of Indonesia


35
BKPM international representative offices
(Investment Promotion Centre):

Invest in...

For further information, contact us at:

Kantor Representatif EU DESK di This presentation has been developed with the
BADAN KOORDINASI PENANAMAN MODAL (BKPM) support of:
REPUBLIK INDONESIA The European Union (EU) Desk at BKPM, part
Jl. Jend. Gatot Subroto No. 44, Jakarta 12190, Indonesia of EU-Indonesia Trade Cooperation Facility
P : +62 21 5274 803 (TCF) projects.
E : eu.tcf@bkpm.go.id
eudesk.bkpm@euind-tcf.com
W : www.bkpm.go.id
www.euind-tcf.com/eudesk/
2015 by Indonesia Investment Coordinating Board (BKPM). All rights reserved

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