Investments into biomass to energy projects in Indonesia

BIOMASS ENERGY FINANCING PERSPECTIVEJakarta 25 Oktober 2011PT Bank Negara Indonesia (Persero) TbkBNI SUPPORTRENEWABLE ENERGYIN INDONESIAPage 0Page 0

BNI OverviewPage 1

BNI has a long track record in theIndonesian banking sectorAsset Loan Deposit1946:BNI EstablishedIndonesiaIndependence(17 August 1945}1996First state-ownedbank, to “gopublic”2000:Post-recap, TheGovernment Owned99.1% of BNI2007: SecondaryOffering, US$445mn new Tier-1capitalToday: Governmentowns 60,0% of BNICompelling Brand Name – 65 years historyNetwork (over 1.295 outlets) including five overseasbranchesCustomer Base – over 12 millions customersThe most extensivedistribution platformin IndonesiaThe 4th largestcommercialbank by assetsizeStrong low-costfunding basewith low LDR Stable and Strong Top Management team Strong ROE and ROA improvement trajectorySource: Bank Indonesia, SPI Dec-2010Page 2

Network & DistributionBNI’s multiple touch points for individual and corporate customersMobilebankingCall CenterATMs(5164)Outlets(1295)Consumerloan centers(37)Small businesscenters(157)Medium businesscenters(20)Indonesia (1290 Outlets)Overseas officesSingapore (Nov 1955)Hong Kong (Apr1963)Tokyo (Sep 1969)London (1987)New York Agency (Apr 1971)BNI has also entered intokey arrangements withprominent companies forpayment channeling,financing, loan distribution,and network/outletdevelopmentIndividual customer highlights 12,3mn deposit accounts 2,1 mm credit cards 83.000 mortgage customersCorporate/SME customer highlights 163,500 corporate deposit accounts 1.000 corporate borrowers 83.000 SME lending accountsPlatform for efficient and effective cross-selling of products and servicesPage 3

BNI ratings2009 2010Fitch RatingNational long term ratingLong term foreign & local currencyShort term foreign & local currencyIndividual ratingSubordinated debtAA (id)BB+/stableBC/D--AA+ (idn)BB+/PositiveBC/D--Standard & Poor'sCredit ratingSenior unsecured ratingSubordinated ratingBB-/Stable/BBB---BB-/Stable/BBB---Moody'sLong term local/foreign currencyDeposit ratingBank Financial Strength RatingOutlookBaa3/Ba3B1DPositiveBa2/Ba2Baa3D-StablePefindoCorporate ratingBond 1SubordinatedidAA/StableidAA/Stable--idAA/StableidAA/Stable--Page 4

BNI SupportRenewable EnergyPage 5

What We Have Done• BNI is the leading financial institution focus on support to social & environment development• BNI listed in Sri Kehati Index (Environmental based stocks index) One of its Mission BNI is concerned with the responsibility of Environment and Society. BNI is a channeling bank for environment investment credit line from several donors institutionssuch as Japan Bank (JBIC) and Kreditanstalt fur Wiederaufbau Frankfurt, Germany (KfW), Dec 2005 BNI is the first national Bank as a member of UNEP FI (United Nation EnvironmentProgramme for Finance Initiative ) Oct 2007 BNI elected as one of Global Steering Committee of UNEP FI Dec 2007 BNI was the Official bank in the United Nations for Climate Change Conference in Bali April 2008, BNI launched a green mortgage product to support “green living”. July 2008 in its 62 anniversary, BNI declared a „BNI Go Green‟ programme May 2009 BNI was the Official bank in the World Ocean Conference in ManadoPage 6

Road Map of SustainabilityInitiatives 2009 2010 2011 2012New ValueCreation BNIGreenEngagement GreenEconomic ValueBNIBusinessProcessPolicydevelopmentInternalization &deployment GreenPolicyMainstreamingGreen paradigminto productfeaturesCompetencybuildingInternal CapacityBuilding creatinggreen economyawarenessPage 7

Developing Green InitiativesNon Business(Indirect)Business(Direct)‣ Restatement mission to accommodate Spirit of Sustainability‣ Socialization to stakeholders‣ Capacity building and implementing of green attitude‣ Participating in green events‣ Relationship & networking with green community‣ Improving portfolio of green lending : forestry, creative industry, renewableenergy, SME (KUR), PKBL, mortgage, green building‣ Improving green funding : partnership with foreign bank/financial institution(correspondence banks, JBIC, Kfw) also donorsPage 8

Scheme FinancingCSRPartnershipProgramLoanProgramCommercialcharity,business responsibilityPKBL (Partnership Program andEnvironment Development)KUR (people based small business loan),JBIC (PAE = Pollution Abatement Equipment),KfW (IEPC = Industrial Efficiency andPollution Control)Business as usual(Small, Medium, Corporate Segment)Page 9

Renewable Energy- Power Plant -Page 10

Loan diversificationsLoans by Economic SectorSectors 2Q-2010 2Q-2011Manufacturing 25% 18%Trading, Resto & Hotel 20% 18%Agriculture 7% 7%Business Service 7% 10%Constructions 7% 6%Transportation & Comm 7% 6%Social Services 2% 1%Mining 4% 7%Electricity, Gas & Water 3% 6%Others 5% 6%Consumer 13% 15%TOTAL LOAN [Rp Bn] 126.231 152.896Page 11

Green FinancingGreen FinancingBNI support Green Project :1) Wayang Windu Geothermal Project in West Java 2 x 110 MW, USD 90,712 Mio2) Patuha Geothermal Plant 1 x 55MW, USD 103 Mio3) Poso Energy Hydropower Plant in Central Sulawesi 3 x 65MW4) Hydropower Plant in Sawangan North Minahasa 7 MW, USD 4,9 Mio5) Waste recycling (turn bottle plastic and such into valuable Dacron), Rp.20 Bio6) Biofuel Project from waste of Palm Oil in Batam 1.000 ton/day , Rp.246,541 Bio7) EtcPage 12

Renewable EnergyPower Plant Project financeSPONSORTHIRD PARTIES AGREEMENTINVOLVEDShareholder Agreement(Subordinated Loan/SOL)GOVERNMENTConcessionEXPORT CREDITAGENCY (IfAvailable)EPCCONTRACTOREPCContractSPECIALPURPOSECOMPANY(SPC)LOANPACKAGE/AGREEMENTARRANGER /CREDITORSSUPPLIERSupplyAgreementO&MCONTRACTORO&MContractInsuranceOFFTAKERINSURERPage 13

Key Success FactorKEY SUCCESKontinuitas Raw Material(energy sales contract, fuel supplyagreement, ext )Track Record inPower plant projectStructuture of Electricity TariffKEYSUCCESSSponsorConsultants• Legal Consultant• Environment Consultant• Insurance Consultant• Technical Consultant• Geothermal and Geology Consultant (depent of type of the Power Plant)Melayani Negeri Kebanggaan BangsaPage 14

Renewable Energy- Powerplant Financing Risk -Page 15

Risk AspectASPEK RESIKO (1)RISK TABLEDESCRIPTIONMITIGATION PLAN1. CHARACTERKnow Your CustomerKey Person• No - NPL dan black list from BankIndonesia2. CAPITALSelf FinancingSelf Financing Commitment• Independent Consultant – PublicAccountant – Self Financing Proven• Cost to complete• Turn key / semi turn key project• Escrow Account• Financial Activity via BNI3. CAPABILITYOperasionalCapability to operate Power Plant• Select Operational and Maintananceoperator who has experienced in PowerPlant• Insurance Cover (business interruption,machinery breakdown) – Banker’s clauseMelayani Negeri Kebanggaan BangsaPage 16

Risk Aspect (2)ASPEK RESIKO (2)RISK TABLE4. CAPABILITYFuel SupplyDESCRIPTIONContinuity of Fuel Supply (geothermal, Water)MITIGATION PLAN• Coal supply Agreement / Energy salescontract• Certification (geothermal, coal)• due diligence of fuel supply.5. CAPABILITYConstructionSpecification of Project Construction• independent Consultanttechnical assessment, project monitoringconstruction mgmt• project design, supervision, manufacturing& installation• Insurance Cover (property all risk)6. CAPABILITYCost OverrunProject cost• Turnkey project• Hedging• Self financingMelayani Negeri Kebanggaan BangsaPage 17

Risk Aspect (3)ASPEK RESIKO (3)RISK TABLE7. CONDITION OFEKSTERNALGovernment PolicyDESCRIPTIONChanging of Government PolicyMITIGATION PLAN• Power Purchase Agreement• Insurance Cover “default payment” –Banker’s clause8. CONDITION OFEKSTERNALEnvironmentEnvironmental issue• AMDAL, RPL and RKL Documents• Independent Consultant – environmentalassessment9. CONDITION OFEKSTERNALSensitifitasFeasibility Study :1. EPC Cost increase2. Interest Rate3. Fuel Supply4. Electricity Production• Turnkey• Cost Overrun - self financing portion• Performance/ Technical guarantee fromEquipment supplier• Insurance Cover (business interruption)Melayani Negeri Kebanggaan BangsaPage 18

Risk Aspect (4)ASPEK RESIKO (4)RISK TABLE10. CONDITION OFEKSTERNALCurrencyCurrency fluctuationDESCRIPTIONMITIGATION PLAN• hedging or cross currency swap• Forex Line11. CONDITION OFEKSTERNALFire / accidentFire and Accident during construction periodInsurance Cover (shipping, equipmentmanufacture, erection s/d COD)12. COLLATERALGuaranteeCollateralCollateral :Project itself - Power PlantElectricity Revenue - Escrow AccountMelayani Negeri Kebanggaan BangsaPage 19

Renewable EnergyCASH WATERFALLFinancing Issues1. Construction risk – civil work, ex : Hydro Power Plant2. High Investment on exploration stage, ex : Geothermal (drilling)3. Bank could not finance on exploration stage (High Risk) ex : Geothermal4. Limited of Green Policy, Rule and frameworkFor instance : no rule of green product and regulation about contribution of governmentcommitment to reduce carbon emission5. Technology and Equipments reliability6. Project’s feasibility Electricity pricing, amount of investment7. Banking sector needs long Term and low cost fundingPage 20

- Renewable Energy -ConclusionPage 21

BNI‟s ConclusionSustainability Objectives1) BNI, the banking sector can serve as a very effective intermediary as it has alreadyinvested in the branch network throughout the archipelago. (no need to reinventthe wheel)2) Despite the absence or lack of regulation, BNI programs have pushed forwardsustainability initiatives3) Regulations would certainty be a push factor to encourage various relevantstakeholder to take part more effectively across industries, sectors, communities4) Incentives are key to speed up the process. In order to incentivize themarket/communities, we need competitive and attractive pricing5) Long term low cost funding sources can help banks to design products andschemes to attract investor - Renewable Energy Project.Page 22

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