To ease the Power Purchase Agreement (PPA) evaluation in due diligence process by financial services institutions, USAID’s Indonesia Clean Energy Development II (ICED II) project launched a handbook to guide financial services institutions in evaluating off-take agreement with state electricity company PLN. The PPA is a long term (up to 30 years) bilateral contract between the project sponsor and PLN as the “off-taker” for the project’s electricity. Part of the ICED II support for Indonesia’s Financial Services Authority (OJK), the handbook was launched during the USAID technical assistance handover certificate event on on June 12, 2020, hosted by the National Development Planning Agency (Bappenas), USAID ICED II, through its subcontractors, also presented business models for solar photovoltaic (PV) power plants and preliminary findings of solar PV project lending survey at the event. Joining the event were 45 participants from Bappenas, OJK, banks and other financial services institutions.
Poppy Veronica from state bank BNI, said she found the handbook very useful for banks in evaluating power purchase agreements for renewable energy projects. BNI planned to upload the handbook in BNI University’s knowledge database.
Many banks and other financial services in Indonesia have been supporting renewable energy investment and are building a portfolio of renewable energy projects. Project sponsors or holding company’s track record and credit worthiness have been the most crucial criteria in credit evaluation of such. However, there are additional project-related risks to lenders based on the specific terms and conditions in the PPA.
Technical assistance to the banking sector has been USAID’s key intervention in increasing the capacity of financial services institutions in financing renewable energy projects. ICED II has provided training and project evaluation, as well as published practical guidelines, handbooks and manuals.