This one-day training was organised by the Directorate General of Energy, Water, and Climate Change under the Ministry of Energy and Mineral Resources (MEMR) of Indonesia and the OECD Clean Energy Finance and Investment Mobilisation Programme to support financial institutions and enhance capacity on the financing of renewable energy projects.
This training introduced participants to renewable energy financing in emerging markets like Indonesia. It focused on electricity generation, primarily on solar and wind, and touched on hydropower. The training covered various financing instrument, with a particular emphasis on non-recourse project finance for grid-scale renewables.
Renewable energy projects are complex transactions, especially when they are structured on a non-recourse basis. Financial institutions need to take multiple factors into account to reach credit approval. The cost of funding is central to projects’ profitability, as renewable energy projects are capital-intensive. Raising awareness among bankers and investors is key to facilitate credit analysis and due diligence, ensure accurate risk assessments and reduce transaction costs.
Renewable energy financing faces many challenges: some power purchase agreements lack bankability, power grids may have significant levels of loss or fragility, the financial situation of utilities can hinder investment, local currency financing may be too expensive or have tenors that are too short for such infrastructure, while country risks and foreign exchange risks can limit international investment. Financial tools and analysis must adapt, based on a good understanding of the sector’s fundamentals.
