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Indonesia's sovereign wealth fund aims to invest up to $1 billion this year with green energy as one of its priorities, as the Southeast Asian country aims to become a hub for the energy transition on the back of vast nickel reserves. ing.
The Indonesian Investment Agency (INA) is discussing potential investments in the electric vehicle ecosystem and geothermal energy, and is providing funding for the early retirement of coal-fired power plants, Chief Financial Officer Eddie said. Polwant told the Financial Times.
The fund has invested $2.1 billion since its inception in 2021 and plans to spend between $500 million and $1 billion across sectors this year, he said.
“Indonesia has the potential to become a regional and even global champion in the future green economy,” Polwanto said. He said Indonesia not only supplies raw materials such as nickel, which has the world's largest reserves of metals used in batteries, but the country could also become a center for EV production and carbon monetization.
“We believe there needs to be a strong ecosystem across the region, so we have been working with a number of strategic battery and EV players to explore investment opportunities not just in Indonesia but across Southeast Asia. Ta.”
INA is in talks with foreign companies for joint investments in nickel mining, smelting and battery manufacturing, Polwant added. He declined to identify potential partners, but said they include companies outside China, which has been the biggest investor in the nickel industry.
Unlike traditional sovereign wealth funds that invest surplus national reserves abroad, INA was established by President Joko Widodo in 2021 with the aim of investing in economically important industries and attracting foreign investors to Indonesia. was established in INA initially received a $5 billion state injection and has also brought in $1.1 billion in investments from foreign companies. The fund had assets under management of $9.5 billion at the end of last year, an increase of one-third from 2022.
According to the 2024 annual report published by Global SWF, a data platform that tracks state-owned investors, including sovereign wealth funds and pension funds, Indonesia ranks alongside China, India and Brazil as the number one destination for new investments by state-owned funds. It is one of the top choices. and central banks.
Under Widodo, Indonesia is leveraging its nickel reserves to attract billions of dollars in investment from smelters, battery makers and automakers. Indonesia's nickel industry is dominated by Chinese companies, with notable investors including producer Aoyama Holdings and battery giant CATL.
President-elect Prabowo Subianto, who is set to take over from Widodo in October, has also vowed to pursue policies that further develop the downstream sector.
In the green energy sector, INA is also “actively supporting Indonesia's energy transition” and is considering financing the early retirement of coal-fired power plants, Polwanto said.
INA's focus comes as experts warn of a huge investment gap in Southeast Asian countries meeting net-zero targets. A recent report by Bain & Company, GenZero, Standard Chartered and Temasek found that the region has seen $45 billion in investment in green projects since 2021, but an estimated $1.5 trillion by the end of the decade. Billion dollars were needed.
Indonesia is one of the world's largest greenhouse gas emitters. Even as Jakarta seeks to position itself as an energy transition hub, the country's nickel industry and broader industrial sector are under increasing pressure to turn to coal-fired power plants.
Earlier this month, Hyundai Motor Co., Ltd. announced that it would be cutting off aluminum supplies from Indonesia's Adaro Minerals following a campaign by climate change groups backed by K-pop fans calling on South Korean automakers to stop supplying from coal-fired power plants. The contract has ended.
Polwant said that besides green energy, INA had strong pipelines in each of its other focus areas, including transportation, logistics, healthcare and the digital economy.
This month, INA and Global Infrastructure Partners, which will be acquired by BlackRock in a $12.5 billion deal, began a joint effort to invest in Indonesia's infrastructure. They will focus on infrastructure development in ports, power generation and transmission, communications towers, fiber optics, and data centers.
In a sign that INA may be preparing to raise capital, the fund received a credit rating from Fitch earlier this year. It was rated “BBB” in line with the Indonesian government.
INA's Polwant said the rating opened up the possibility of raising funds from offshore markets, although there were no immediate plans to raise funds.
He said, “Our rating gives potential investors more confidence to co-invest with INA in Indonesia, and we are an investment grade organization, which gives us more confidence from potential funders.” I look forward to getting it.”
Fitch analyst Paul Norris said INA's co-investment model could alleviate some of the fears of foreign investors new to Indonesia. “Their model is well set up to attract investment. Not only are they acting as a broker of sorts, but they are also investing at the same time,” he said.
