PT SMI established a Sustainable Financing Division in 2016 and was the first accredited entity in Southeast Asia by the Green Climate Fund, allowing financing up to $250 million. PT SMI issued Indonesia's first green bond and developed environmental and social safeguard guidelines. It was also appointed to the country's Energy Transition Mechanism in 2022. However, energy efficiency projects in Indonesia face challenges including low electricity rates, lack of awareness, small project sizes, and limited bankable projects and financing products. Financial risks are perceived as the highest risk for energy efficiency projects.

1. PT SMI’s Perspective on Energy Efficiency
Energy Savings Insurance: International Focus Group Discussion
Faaris Pranawa
Director
14 March 2023

2. PT Sarana Multi Infrastruktur (Persero) | 2
The Role of PT SMI in Sustainable Finance and Addressing Climate Change
Sustainable Financing
Establishing Sustainable Financing Division in 2016
Green Climate Fund (GCF)
PT SMI is the First Accredited Entity in
Southeast Asia
Accreditation Size :
Medium (up to 250 mill USD)
SDG Indonesia One (SIO)1
In 2018, SIO was formed, a platform to
support the achievement of SDGs,
including climate change projects
Green Bond & Impact Report
Issued the first green bond in Indonesia
Environmental and Social Safeguard
(ESS) Framework
Development and Implementation of the Guidelines of
Environmental and Social Safeguard (ESS) Framework
Energy Transition
Mechanism (ETM)
In 2022 appointed as the country platform
Energy Transition Mechanism, an early
retirement funding mechanism for PLTU
and renewable energy financing
SMI Institute
The think tank formed by PT SMI, aims to
provide research, capacity building and training
policies, as well as outreach to help developing
countries, especially in the infrastructure
development sector, to achieve stronger,
inclusive and sustainable growth.
PT Sarana Multi Infrastruktur (Persero) was established in 2009 as a State-Owned Enterprise under the Ministry of Finance.
PT SMI's business activities are regulated in the Financial Services Authority Regulation (“POJK”) concerning Infrastructure Financing Companies
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1SIO Green Facility:
ADB (150 mill USD loan) ; AFD (150 mill USD loan + 5.6 mill USD grant) ; GREM (197.5 mill USD loan + 122.5 mill
USD reimbursable grant + 6.25 mill USD grant) ; UK Mentari (2.7 mill GBP grant) ; KfW (16.08 mill EUR grant)

3. PT Sarana Multi Infrastruktur (Persero) | 3
Energy Efficiency Market in Indonesia
Untapped energy efficiency sectors:
There is a huge potential for energy efficiency in
Indonesia
Electricity rates:
Low electricity rates create low demand for energy
efficiency projects and low return
Awareness:
Low awareness of energy efficiency technologies
and opportunities
Energy saving:
Lack of understanding and
confidence in energy saving
Bankable projects:
Limited bankable energy efficiency projects
- Small project size
- Securities
- Existing lenders approvals
Financing:
No commercially attractive financing
product for energy efficiency projects

4. PT Sarana Multi Infrastruktur (Persero) | 4
Financing Perspective on Energy Efficiency
Guaranteed Saving Model Shared Saving Model
• Uncertainty from energy saving, therefore, need to be guarantee or insurance by third party
• Need bankable ESCO company (good track record and good financial statement)
• Support in the form of incentive for Investment Grade Audit (IGA) for project owner
• Corporate finance model can be an alternative to project finance model; however the energy
efficiency asset is still included as underlying
• Bundling of several projects into one facility, considering average projects are small sized
projects, to reduce transaction cost
Enhancement
needed to
support energy
efficiency
business model

5. ptsmi.co.id
infralib.ptsmi.co.id
@ptsmi
ptsmi_id
PT Sarana Multi Infrastruktur (Persero)
Sahid Sudirman Center, Lantai 48
Jl. Jenderal Sudirman No. 86
Jakarta 10220, Indonesia
Telepon : (62-21) 8082 5288 (hunting)
Faksimile : (62-21) 8082 5258
Surel : corporatesecretary@ptsmi.co.id
PT Sarana Multi Infrastruktur (Persero)
Terima kasih,

6. PT Sarana Multi Infrastruktur (Persero) | 6
Risks in Energy Efficiency Projects
RISK IMPACT LIKELIHOOD
Economic and Financial: cost increases, interest rates, volatile energy prices, payment default High Medium
Financial resources: limited calculations of risk and return, limit the supply of affordable capital and the demand for such
investments.
High Medium
Behavioral and Operational: behavioral biases, rebound effect, faulty operation, unexpected consumption pattern Medium Low
Awareness and commitment: lack of knowledge of EE, skepticism and misunderstanding of benefits, conflicting priorities, and
a lack of motivation across businesses stymie the potential demand, lack of a convincing business case in contexts with cheap
energy and absent regulation
Medium Medium
Measurement and Verification: Poor data quality, inconsistent measurement, modeling errors Medium Medium
Technical solutions and expertise: Insufficient technical capacity, lack of commonality on best practice and standardization of
procedures and technologies
Medium Medium
Contextual and Technology: Poor project design, installation delays, insufficient information on facility, poor equipment design,
poor performance
Medium Low
Regulatory: Changes in grant/subsidy programs, unfavorable financial regulation, conflicting guidelines, changing regulation on
financial market
High Medium
Environment: Risks related to the location, surrounding environment of the project Medium Low
• Financial risk is perceived as the highest risk seen in energy efficiency projects, which is caused by small project size, limited
financial capability of the ESCO company
• Proven business model is needed to help in scaling up energy efficiency projects in Indonesia
• De-risking instruments such as guarantee or insurance should be designed to increase credit rating and bankability of the project
Source: Climate Policy Initiative, 2021