Indonesia’s new sovereign wealth fund Danantara will develop 10 gigawatts (GW) of renewable energy under a joint venture with the United Arab Emirates for its maiden project, according to a senior presidential economic advisor.
National Economic Council (DEN) head Luhut Pandjaitan said on Tuesday that he had discussed the cooperation with UAE Energy Minister Suhail Al Mazrouei, who expressed interest in teaming up with several state-run firms under Danantara to push the project forward.
“The beauty of Danantara is that it has the authority to set up joint ventures with any company,” said Luhut during a panel at the Indonesia Economic Summit held by the Indonesia Business Council in Jakarta, as reported by Thejakartapost.com.
Abu Dhabi had been aware of Danantara for a while, Luhut added, and they would like to move “very quickly” with the state investment body that will be formally launched on Feb. 24.
The joint venture plan is in line with the country’s ambitious goal to add 75 GW of renewable power over the next 15 years, or roughly about 70 percent of its planned new energy capacity in 2040.
According to the Energy and Mineral Resources Ministry, 75 GW would come from renewable energy sources, such as wind, solar, hydro and geothermal. The rest would include 22 GW coming from natural gas powered plants and 5 GW of nuclear power.
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Achieving this target will require at least US$235 billion in investment, as estimated by the state-owned electricity company PT PLN.
Currently, renewable energy sources make up only 14 percent of the national energy mix, with the majority still generated from coal, oil and gas, according to Energy and Mineral Resources Ministry data. President Prabowo Subianto said that Danantara’s immediate priority this year would be kick-starting 15 multibillion-dollar megaprojects without tapping external financing, such as renewable energy, advanced manufacturing, downstream industries and food production.
Danantara, the country’s new sovereign wealth fund with more than $900 billion in assets under management, will centralize the management of state-owned enterprises (SOEs), including their dividends and investments.
As an initial fund, Danantara will be seeded with $20 billion, drawn from deeper government-wide budget cuts and SOE dividends.
Prabowo has eyed to save over Rp 750 trillion, which he estimated equivalent to $44 billion through multiple phases of fiscal consolidation this year.
His administration has concluded the first phase by identifying over Rp 300 trillion to be saved up in the state-discretionary fund. The second phase is set to save up Rp 250 trillion more from budget cuts across ministries and agencies, as well as regional governments, which he ordered earlier this year.
The remainder will be taken from SOE dividends, amounting to Rp 200 trillion out of a total Rp 300 trillion generated by state-run firms annually. Prabowo said the remaining Rp 100 trillion would be reinvested into SOEs’ working capital.
Editing by Reiner Simanjuntak
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