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INNOVATIVE FISCAL POLICIES TO CREATE ENERGY RESILIENCE FOCUSING ON GEOTHERMAL ENERGY

INNOVATIVE FISCAL POLICIES TO CREATE ENERGY RESILIENCE FOCUSING ON GEOTHERMAL ENERGY. Jakarta, 4 June 2014. Fiscal Policy Agency Ministry of Finance, Republic of Indonesia. Content. Geothermal Development Zone Problems in Geothermal Government Supports for Geothermal

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INNOVATIVE FISCAL POLICIES TO CREATE ENERGY RESILIENCE FOCUSING ON GEOTHERMAL ENERGY

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  1. INNOVATIVE FISCAL POLICIES TO CREATE ENERGY RESILIENCE • FOCUSING ON GEOTHERMAL ENERGY Jakarta, 4 June 2014 Fiscal Policy Agency Ministry of Finance, Republic of Indonesia

  2. Content • Geothermal Development Zone • Problems in Geothermal • Government Supports for Geothermal • Geothermal Fund Facility • Business Viability Guarantee • Incentives for Geothermal

  3. Geothermal Development Zone • SULAWESI • (2.3 GWe) • Resources (1.127 MWe): • Speculative : 1000 MWe • Hypothetical : 127 MWe • Reserve (1.220 MWe): • Possible : 992 MWe • Probable : 150 MWe • Proven : 78 MWe • SUMATERA • (13.3 GWe) • Resources (7.001 MWe): • Speculative : 4925 MWe • Hypothetical : 2076 MWe • Reserve (6.378 MWe): • Possible : 5983 MWe • Probable : 15 MWe • Proven : 380 MWe • MALUKU • (0.9 GWe) • Resources (588 MWe): • Speculative : 545 MWe • Hypothetical : 43 MWe • Reserve (341 MWe): • Possible : 341 MWe • Probable : - • Proven : - Maluku Sulawesi Sumatera Kalimantan Irian Jaya • JAWA • (10 GWe) • Resources (3.881 MWe): • Speculative : 1935 MWe • Hypothetical : 1946 MWe • Reserve (6.115 MWe): • Possible : 3415 MWe • Probable : 885 MWe • Proven : 1815 MWe • NUSA TENGGARA • (1.5 GWe) • Resources (699 MWe): • Speculative : 340 MWe • Hypothetical : 359 MWe • Reserve (762 MWe): • Possible : 747 MWe • Probable : - • Proven : 15 MWe Jawa Alor Bali Flores Timor High temperature geothermal zone, large potential, and found many other types of energy High temperature geothermal zone,  large-small potential, and lack of other energy types Low-temperature geothermal energy zone, small-medium potential, and lack other types of energy

  4. - Fasilitas PPh dan Fasilitas PPN Problems in Geothermal • Insuficient Data Geothermal tendering process does not provide proven capacity data, as results: • Bidders speculate the geothermal capacity; • Exploration risk is internalised in electricity tariff so the tariff is higher; • Lenders can not assess the bankability of geothermal project. • Not-bankable • Most of the geothermal projects are developed as IPP (Independent Power Producer) structured as project financing scheme; • The structure of financing has big portion in loan, however lenders can not assess bankability of the project; • Therefore lenders are not attracted to give financing commitment.

  5. Government Supports for Geothermal 5

  6. Geothermal Fund Facility

  7. Business Viability Guarantee

  8. Fiscal Incentives for Income Tax a. Tax Holiday • Exemption or reduction of corporate income tax for pioneer industry. (Ministry of Finance Regulation No. 130/PMK.011/2011) • Pioneer industries which deserve the benefit of the regulation include industry in renewable resources field. • Facility given based on regulation is exemption of corporate income tax (from 5 to 10 tax years) and after the periode of corporate income tax exemption ended, industries are given reduction 50% of corporate income tax due, for 2 tax years. Only one of these two incentives may be applied. b. Investment Allowance for Geothermal (KBLI 06202) • Fiscal incentives on income tax for investment in certain business sector and location of project. (Government Regulation No. 52/2011) • Facilities given are including: • Reduced net income tax for 30% of total investment (5% a year for 6 years). • Accelerated depreciation. • Income tax rate 10% or lower based on tax treaty, on dividend paid to non-resident tax payer. • Compensation for losses in certain circumstances.

  9. Fiscal Incentives for Value Added Tax Exemption of Value Added Tax Exemption of Value Added Tax for import of machinery and equipment, not including spare part. (Government Regulation No 31/2007) Fiscal Incentives for Import Duty Exemption of Import Duty • Exemption of Import Duty for machinery, goods, and materials for construction and development. (Ministry of Finance Regulation No 176/PMK.011/2009) • Incentives are given as long as the machinery, goods, and materials: • have not been produced in domestic area; • have been produced in domestic area yet its specifications do not meet the criteria; • have been produced in domestic area yet the quantity is not sufficient. Fiscal Incentives for Witholding Income Tax for Import Exemption of Witholding Income Tax Art 22 for Import Exemption of Witholding Income TaxArt 22 for import of machinery and equipment, not including spare part. (Ministry of Finance Regulation No 21/PMK.011/2010)

  10. Incentives for Geothermal Operation Exploration Construction • Law Base: • 1,2, dan 3 : MOF Regulation 21 /2010; • 4 : MOF Regulation 03 /2012; • 5.a. : MOF Regulation 139 / 2011; • 5.b. : Presidential Decree 78 / 2010 and MOF Regulation 260 / 2010.

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