Developing a Guarantee Instrument to Catalyze Renewable Energy Investment in Indonesia

The report identifies a USD 125 billion investment gap for Indonesia's 2025 clean energy targets and argues that while general guarantee products exist, none specifically target renewable energy. It proposes that a local credit guarantee, potentially developed by PT SMI, could catalyze private investment by addressing security gaps for small developers and improving risk-return profiles, despite challenges such as competition from corporate guarantees and bank demands for 'first demand' reimbursement.

• Indonesia requires an estimated USD 125 billion in investment by 2025 to meet its clean energy mix targets, but private investment remains insufficient.
• Several barriers hinder private investment in Indonesia's renewable energy sector, including high upfront capital requirements, insufficient project sizes that attract developers with small balance sheets, and a limited appetite from local commercial banks due to a lack of expertise in non-recourse project finance.
• While ten organizations provide 13 guarantee products in the Indonesian market, none specifically target the renewable energy sector. Most existing guarantees focus on large-scale transactions exceeding USD 100 million.
• A tailored credit guarantee for renewable energy could address specific investment barriers by bridging the security gap for small developers, improving the risk-return profile when a guarantor assigns lower risk than lenders, and increasing access to long-term funding from local banks.
• Implementing a guarantee instrument in Indonesia faces four primary challenges: competition with lower-cost corporate or shareholder guarantees, bank requirements for 'first demand' features (unconditional and irrevocable reimbursement), limited guarantor involvement in recovery proceedings after default, and low awareness of such instruments among financial institutions.
• PT SMI is positioned to catalyze clean energy investments due to its AAA local and BBB international credit ratings, low leverage ratio (40% debt split), and ability to raise low-cost funding and access international partners.

APA

Rakhmadi, R., & Sudirman, M. (n.d.). Developing a Guarantee Instrument to Catalyze Renewable Energy Investment in Indonesia. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2019/05/Developing-a-Guarantee-Instrument-to-Catalyze-Renewable-Energy-Investment-in-Indonesia.pdf

Chicago

Rakhmadi, Randy, and Melisa Sudirman. Developing a Guarantee Instrument to Catalyze Renewable Energy Investment in Indonesia. Climate Policy Initiative, n.d. https://www.climatepolicyinitiative.org/wp-content/uploads/2019/05/Developing-a-Guarantee-Instrument-to-Catalyze-Renewable-Energy-Investment-in-Indonesia.pdf.

Wikipedia

{{cite report |last1=Rakhmadi |first1=Randy |last2=Sudirman |first2=Melisa |title=Developing a Guarantee Instrument to Catalyze Renewable Energy Investment in Indonesia |publisher=Climate Policy Initiative |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2019/05/Developing-a-Guarantee-Instrument-to-Catalyze-Renewable-Energy-Investment-in-Indonesia.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rakhmadinddeveloping, author = {Rakhmadi, Randy and Sudirman, Melisa}, title = {{Developing a Guarantee Instrument to Catalyze Renewable Energy Investment in Indonesia}}, institution = {Climate Policy Initiative}, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2019/05/Developing-a-Guarantee-Instrument-to-Catalyze-Renewable-Energy-Investment-in-Indonesia.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }