BUSINESS SOLUTIONS TO ACCELERATE RENEWABLE ENERGY (SOLAR PV) LOAN PORTFOLIO’s GROWTH IN PT BANK MANDIRI (PERSERO), TBK FINAL PROJECT By: HENDY OCTORINO 29320327 Master of Business Administration Program School of Business and Management Bandung Institute of Technology August 2023 i SOLUSI BISNIS UNTUK PERCEPATAN PERTUMBUHAN PORTOFOLIO KREDIT ENERGI TERBARUKAN (SOLAR PV) PADA PT BANK MANDIRI (PERSERO), TBK HENDY OCTORINO 29320327 Date of Passing of Final Test ( / / ) Date of Graduation Ceremony ( / / ) Master of Business Administration Program Institut Teknologi Bandung, 2023 Final Project Counselor: Yudo Anggoro,Ph.D ABSTRAK Pemerintah Indonesia memiliki target utama untuk mencapai kapasitas terpasang pembangkit energi baru dan terbarukan sebesar 23% dari total bauran energi pada tahun 2025 serta net zero emissions pada tahun 2060. Sebagai pedoman untuk mencapai misi tersebut, Pemerintah Indonesia telah menerbitkan Rencana Usaha Penyediaan Tenaga Listrik (“RUPTL”) 2021 – 2030 pada tahun 2021 yang diklaim sebagai RUPTL paling ramah lingkungan hingga saat ini, tercermin dari rencana pengembangan kapasitas terpasang pembangkit energi baru terbarukan sebesar 51.6% atau 20,923 MegaWatt (“MW”) pada tahun 2030. Sektor perbankan berperan penting untuk mendukung misi Pemerintah Indonesia mengingat investasi yang dibutuhkan sebesar USD 6.3 Miliar sehubungan dengna keterbatasan anggaran Pemerintah maupun sektor swasta. Implementasi keuangan yang berkelanjutan memiliki tantangan, dimana program ini merupakan konsep baru bagi para pihak yang terlibat di ekosistem energi baru dan terbarukan. Terbatasnya professional yang memiliki keahlian serta masih sedikitnya proyek – proyek energi baru dan terbarukan merupakan beberapa contoh dari tantangan dimaksud yang dapat membatasi kemampuan Bank Mandiri untuk menyediakan pembiayaan untuk proyek – proyek yang berkelanjutan. Penelitian ini dilakukan untuk meninjau dan menganalisa masalah bisnis di Bank Mandiri terkait portofolio kredit proyek energi terbarukan (Solar PV) serta mengusulkan solusi bisnis untuk percepatan dan peningkatan pertumbuhan portofolio kredit tersebut berdasarkan kerangka konseptual. Kata Kunci: Renewable Energy, Green Financing, Net Zero Emissions, RUPTL 2021 – 2030 ii BUSINESS SOLUTIONS TO ACCELERATE RENEWABLE ENERGY (SOLAR PV) LOAN PORTFOLIO’s GROWTH IN PT BANK MANDIRI (PERSERO), TBK HENDY OCTORINO 29320327 Date of Passing of Final Test ( / / ) Date of Graduation Ceremony ( / / ) Master of Business Administration Program Institut Teknologi Bandung, 2023 Final Project Counselor: Yudo Anggoro,Ph.D ABSTRACT The Government of Indonesia has an important mission to reach the installed capacity of new and renewable energy by 23% from the total energy mix in 2025 and net zero emissions in 2060. As a guideline to achieve the mission, The Electricity Supply Business Plan (“RUPTL”) 2021 – 2030 of PT PLN (Persero) has been issued by the GOI in 2021 and it is claimed as the greenest RUPTL to date and marks a turning point for Indonesia’s energy transition plan where it contains a larger portion of capacity expansion plan for renewable energy generation of 51.6% or 20,923 MegaWatt (“MW”) in 2030. Banking sector plays important role to support the GOI mission considering the investments needed amounting USD 6.3 Billion and both the government and private sectors have limitation on budget. Sustainable finance’s execution is quite challenging considering its essentially a new practice for parties involved in the ecosystem. An inadequacy of experts and few number of sustainability- determined projects in new and renewable energy projects are several of the challenges that may severely restricted Bank Mandiri’s desire to provide financing in sustainable projects. This research is conducted to review and analyze Bank Mandiri’s business issue in renewable energy (Solar PV) project’s loan portfolio and to propose business solutions to accelerate and increase the bank’s loan portfolio growth based on the conceptual framework. Keywords: Renewable Energy, Green Financing, Net Zero Emissions, RUPTL 2021 – 2030 iii DECLARATION OF NON-PLAGIARISM Plagiarism is considered as the act of dishonesty and a breach of academic ethics in which strongly against the School’s policy and regulation. I declared that the materials presented in this Final Project are my own work and do not involve plagiarism. Should I do plagiarism in this Final Project, hereby I am willing to accept any consequences determined by the School. Name : Hendy Octorino Student ID : 29320327 Signed Date : 31 – May – 2023 Plagiarism is: Plagiarism is presenting someone else’s work or idea as your own, with or without their consent, by incorporating it into your work without full acknowledgement. All published and unpublished material, whether in manuscript, printed or electronic form, is covered under this definition. Plagiarism may be intentional or reckless, or unintentional. Under the regulations for examinations, international or reckless plagiarism is a disciplinary offence. [Oxford, 2019] is: iv VALIDATION PAGE BUSINESS SOLUTIONS TO ACCELERATE RENEWABLE ENERGY (SOLAR PV) LOAN PORTFOLIO’s GROWTH IN PT BANK MANDIRI (PERSERO), TBK Written by: HENDY OCTORINO 29320327 Master of Business Administration Program Energy Management Approving, Counselor, Dated on 31 May 2023 Yudo Anggoro,Ph.D NIP: 115110021 v ACKNOWLEDGEMENT program. 3. Neney and Aki for their continuous support. 4. Mr. Yudo Anggoro, Ph.D, final project counsellor, for his sat-set responses, fascinating guidance and insightful mentoring sessions. 5. PT Bank Mandiri (Persero), Tbk and all the stakeholders involved so that the author can finalized the final project, not to mention Mr. Midian Samosir and Mr. Hendra Sulaiman. 6. ENEMBA 6 classmate for being always competitive and solid classmate. 7. SBM ITB Energy Management facilitators and guest lecturers for the knowledge and unparalleled experience shared. 8. SBM ITB personnel for the assistance which started from the COVID-19 outbreak period until it has been declared as endemic to date. Jakarta, 31 May 2023 Hendy Octorino Bismillahhirrahmannirrahim, First and foremost, the author would like to praise Allah swt, the God Almighty for His blessings, good fortune, health and happiness provided throughout author’s journey that is full of excitement. The author would like to acknowledge: 1. E.Y. and H.O. for the encouragement, love and endless support. 2. Mom and Dad who always pray, motivate and encourage the author to complete the MBA vi TABLE OF CONTENT Table of Contents ABSTRAK ........................................................................................................................................................... 1i ABSTRACT ....................................................................................................................................................... 1ii DECLARATION OF NON-PLAGIARISM ...................................................................................................3iii VALIDATION PAGE ...................................................................................................................................... 4iv ACKNOWLEDGEMENT ................................................................................................................................ 5v TABLE OF CONTENT ................................................................................................................................... 6vi LIST OF FIGURES ......................................................................................................................................... 8vii LIST OF APPENDICES ................................................................................................................................. 10x CHAPTER 1 INTRODUCTION ........................................................................................................................ 1 1.1 Indonesia Energy Overview ................................................................................................................ 1 1.2 Bank Mandiri at Glance ...................................................................................................................... 3 1.3 Key Factors and Key Players in Solar PV Project ......................................................................... 38 1.4 Problem Statement .......................................................................................................................... 813 1.5 Research Objective ............................................................................................................................ 13 1.6 Research Question ............................................................................................................................. 13 1.7 Scope and Limitation ......................................................................................................................... 14 1.8 Research Systematic .......................................................................................................................... 14 CHAPTER 2 LITERATURE REVIEW .......................................................................................................... 15 2.1 Renewable Energy ............................................................................................................................. 15 2.2. General Overview of Financing ........................................................................................................ 20 CHAPTER 3 RESEARCH METHODOLOGY .............................................................................................. 29 3.1 Conceptual Framework ........................................................................................................................ 29 3.2. Data Collection ................................................................................................................................... 29 3.3. Internal Analysis ................................................................................................................................ 30 3.4. External Analysis ............................................................................................................................... 32 3.4.1. PESTEL Framework ..................................................................................................................... 32 3.4.2. PORTER’s Five Forces ................................................................................................................. 34 3.5. SWOT Analysis .................................................................................................................................. 36 CHAPTER 4 ANALYSIS ................................................................................................................................ 39 4.1 VRIO Analysis ................................................................................................................................... 39 4.2 PESTEL Framework ......................................................................................................................... 40 4.3 PORTER’s FIVE FORCES .............................................................................................................. 45 4.4 SWOT Analysis .................................................................................................................................. 39 4.4 TOWS Matrix .................................................................................................................................... 56 vii 4.5 Interview Sessions .............................................................................................................................. 65 CHAPTER 5 CONCLUSION and IMPLEMENTATION PLAN ................................................................ 67 5.1 Conclusion .......................................................................................................................................... 67 5.2 Implementation Plan ......................................................................................................................... 70 REFERENCES .................................................................................................................................................. 73 APPENDIX A. INTERVIEW SUMMARY .................................................................................................... 75 viii LIST OF FIGURES Figure 1.1 Bank Mandiri Sustainability Framework………………………………………… ……6 Figure 2.1 Renewable Energy Resources……………………………………………………... .....11 Figure 2.2 Type of Geothermal Resources, Temperatures and Their Applications………............12 Figure 2.3 Solar PV Mechanism………………….……………………………... ………..............13 Figure 2.4 Summary of Solar PV Characteristic………………………………………………….14 Figure 2.5 Advantages and Disadvantages Renewable Energy Sources…………………… …….15 Figure 2.6 Investment Barriers………………………………………………… ...…………… ….20 Figure 2.7 Basic Structuring of Credit Enhancement Fund………………………………… ……22 Figure 2.8 Summary of 3 Funding Instruments……………………………………………… …..26 Figure 2.9 Green Bond’s Use of Proceeds………………………………………………………..27 Figure 2.10 Summary of Advantages and Disadvantages Green Bond…………………………...28 Figure 3.1 Conceptual Framework…………………………………………………… .………….29 Figure 3.2 VRIO Framework…………………………………………………… .………… …….31 Figure 3.3 PESTEL Framework……………………………………………………… ..………...32 Figure 3.4 PORTER’s Five Forces……………………………………………………………….34 Figure 3.5 SWOT’s Diagram………………………………………………………………….... . 37 Figure 4.1 Bank Indonesia’s Monetary Policy Framework…………………………… ..…....…. 41 Figure 4.2 Global Weighted Average LCOE Power Generation……………………… .…..…… 43 Figure 4.3 Global Average Solar PV Annual Investment………………………………… …..… 44 Figure 4.4 Indonesia Banking Number’s Trend……………………………………………… … 47 Figure 4.5 Market Share of Banking Sector as of December 2022………………………… …... 48 Figure 4.6 WACC Formula…………………………………………………………………… ....51 Figure 4.7 Indonesia’s Local Content Requirement..…………………………………………....56 ix LIST OF TABLES Table 1.1 Renewable Energy Capacity Expansion Plan 1 Table 1.2 PLN’s CAPEX Plan and Realization 2 Table 1.3 List of Bank Mandiri’s Subsidiaries 3 Table 1.4 Performance Indicator of Bank Mandiri Wholesale Banking Segment 5 Table 1.5 Bank Mandiri Sustainability Portfolio as of December 2022 7 Table 3.1 List of Respondents 30 Table 4.1 Bank Mandiri’s VRIO Framework Analysis 39 Table 4.2 Indonesia’s Renewable Energy Potential 53 Table 4.3 TOWS Matrix 57 Table 5.1 Implementation Plan 70 x LIST OF APPENDICES APPENDIX A. Interview Summary…………………………………………………………….. 75.