TheRoleofProjectFinanceinEnsuringSustainabilityand ManagingRisks:LessonsfromtheRajamandalaProject FINALPROJECT Inpartialfulfilmentoftherequirements forthemaster’sdegree fromInstitutTeknologiBandung By AnggitaTriAyuningtyas 29323095 (MasterofBusinessAdministrationProgram) INSTITUT TEKNOLOGI BANDUNG March 2025 ii ABSTRACT TheRoleofProjectFinanceinEnsuringSustainabilityandManaging Risks:LessonsfromtheRajamandalaProject By AnggitaTriAyuningtyas StudentID:29323095 (MasterofBusinessAdministrationProgram) Indonesiahasbeenstrugglingtotransitionfromcoalminingandleaningtowardsrenewable energy.TransitioningtorenewableenergyhasbeenanaimforPTPerusahaanListrik NegaratoachieveIndonesiareducingcarbonemissionandtoensuresustainablepower generation.However,PLNfacesdifficultiesinfinancialfundingforrenewableenergy, merelyonthehydroelectricpower.Theaimforthisresearchistoimplementproject financingasatooltohelpprojectsoptimizeprofitability,reducerisk,andtoattractinvestors. UsinganexistinghydroelectricpowerplantcasefromPLNcalledRajamandalahydro powerplantasanexampletoassessthefinancialperformanceduringfeasibilitystudy, completion,andoperation&maintenancestages.TheresearchresultedinRajamandala projectfacesconcernsofprofitabilityduetocostoverruns,constructiondelay,andlow electricityproduction.Duringthefeasibilitystage,theprojectresultedinapromisingresult ofIRRequityof12.25%andIRRprojectof7.95%,biggerresultsthantheprojectsWACC of7.52%.theresultdeclineduringthecompletionstageduetoconstructiondelaywhich causetheprojecttohaveoverruncostandresultedthedecliningofIRRequity7.82%and IRRproject3.68%andcausingNPVperformancetonegatives-39.6234MUSD.InO&M stage,thefinancialmodelincorporatedcarboncreditrevenuetosupporttheproject performance,whichresultedinanincreaseofIRRequity8.20%andIRRproject4,21%and anincreaseofNPV-34,8530MUSD.Buttheprojectstillstruggletoexceeditsweighted averagecostofcapital(WACC). Toavoidthefinancialtrouble,theresearchrecommendre-constructingamoreflexible financialstructure,conductingriskanalysis,andadaptivepricingstrategies.By incorporatingtheserecommendations,PLNcansurelyimprovethesustainabilityofprojects inthelongrunandincreaseattractivenesstoinvestors.Thesekeyaspectareimportantasa supportactionplanofIndonesia’sincreaseofEBTprojects,reduceemission,helptransition togreenenergyandserveasareferenceguideforfuturehydroelectricpowerplant Keywords:projectfinance,financialmodel,costoverrun,pricingstrategy,feasibility, construction,profitabilityandRiskManagement. iii ABSTRAK PeranPembiayaanProyekdalamMemastikanKeberlanjutandan MengelolaRisiko:PelajarandariProyekRajamandala Oleh AnggitaTriAyuningtyas IDMahasiswa:29323095 (ProgramStudiMagisterAdministrasiBisnis) Indonesiatengahberjuanguntukberalihdaripenambanganbatubaradanberalihke energiterbarukan.TransisikeenergiterbarukantelahmenjaditujuanPTPerusahaan ListrikNegarauntukmencapaiIndonesiayangmengurangiemisikarbondanmemastikan pembangkitanlistrikyangberkelanjutan.Namun,PLNmenghadapikesulitandalam pendanaankeuanganuntukenergiterbarukan,terutamapadatenagaair.Tujuandari penelitianiniadalahuntukmenerapkanpembiayaanproyeksebagaialatuntukmembantu proyekmengoptimalkanprofitabilitas,mengurangirisiko,danmenarikinvestor. MenggunakankasuspembangkitlistriktenagaairyangadadariPLNyangdisebut pembangkitlistriktenagaairRajamandalasebagaicontohuntukmenilaikinerjakeuangan selamastudikelayakan,penyelesaian,dantahapoperasi&pemeliharaan.Penelitianini menghasilkanbahwaproyekRajamandalamenghadapimasalahprofitabilitaskarena kelebihanbiaya,keterlambatankonstruksi,danproduksilistrikyangrendah.Selamatahap kelayakan,proyekmenghasilkanhasilyangmenjanjikandariekuitasIRRsebesar12,25% danproyekIRRsebesar7,95%,hasilyanglebihbesardaripadaproyekWACCsebesar 7,52%.Hasilmenurunpadatahappenyelesaianakibatketerlambatankonstruksiyang mengakibatkanproyekmengalamikelebihanbiayaoperasionaldanmengakibatkan turunnyaIRRekuitassebesar7,82%danIRRproyeksebesar3,68%sertamenyebabkan kinerjaNPVmenjadinegatif-39,6234MUSD.PadatahapO&M,modelkeuangan memasukkanpendapatankreditkarbonuntukmendukungkinerjaproyek,yang mengakibatkanpeningkatanIRRekuitassebesar8,20%danIRRproyeksebesar4,21% sertapeningkatanNPV-34,8530MUSD.Namunproyekmasihberjuanguntukmelampaui biayamodalrata-ratatertimbang(WACC).Untukmenghindarikesulitankeuangan, penelitianinimerekomendasikanuntukmembangunkembalistrukturkeuanganyanglebih fleksibel,melakukananalisisrisiko,danstrategipenetapanhargayangadaptif.Dengan memasukkanrekomendasiini,PLNpastidapatmeningkatkankeberlanjutanproyekdalam jangkapanjangdanmeningkatkandayatarikbagiinvestor.Aspek-aspekkunciinipenting sebagaipendukungrencanaaksipeningkatanproyekEBTdiIndonesia,mengurangiemisi, membantutransisimenujuenergihijau,danberfungsisebagaipanduanreferensiuntuk pembangkitlistriktenagaairdimasamendatang. Katakunci:pembiayaanproyek,modelkeuangan,kelebihanbiaya,strategipenetapan harga,kelayakan,konstruksi,profitabilitas,danManajemenRisiko. iv v TheRoleofprojectFinancingInEnsuringSustainabilityandManaging Risk:LessonlearnfromRajamandalaProject By AnggitaTriAyuningtyas StudentID:29323095 MasterofBusinessAdministrationProgram InstitutTeknologiBandung Approved Date11February2025 Supervisor Co-Supervisor (RadenAswinRahadi) (AcepRJayaprawira) vi FINALPROJECTGUIDANCE Unpublishedmasters’finalprojectisregisteredandavailableintheLibraryofBandung InstitutofTechnology,andisopenforpublic,providedthattheauthorownsthecopyright inaccordancewiththeintellectualpropertyrightsthatareapplicableintheLibraryof InstitutTeknologiBandung.Bibliographicalreferencesareallowedtobeuseinalimited manner,howeverthecitationandsummarizationcanonlybeproceedupontheauthor’s permissionandmustincludethescientificnormofstatingthisfinalprojectasthesource. Thisfinalprojecthastobecitedas: Reproductionorpublicationofpartsorwholeofthefinalprojectmustbeunderthe consentoftheHeadofGraduateSchool,BandungInstituteofTechnology. Ayuningtyas, A.T.(2025):The Role of Project Finance in Ensuring Sustainability and Managing Risks: Lessons from the Rajamandala Project, Master's final project, Institut Teknologi Bandung. ii ACKNOWLEDGEMENTS Withgreatrespectandgratitude,Ipresentthisthesistitled“Projectfinancing modelingtooltomanageprojectprofitability”aspartoftherequirementsto achieveamaster’sdegreeintheMBAprogramattheSchoolofBusinessand Management,InstitutTeknologiBandung.Iwouldliketotoexpressmysincere gratitudeto: 1.AcepRJayaprawiraandRadenAswinRahadiasmythesiscounselor, foryourguidance,support,andencouragementthroughouttheentire researchprocess.Yourinsightsandexpertisehavebeeninvaluablein completingthiswork. 2.MyFatherasmynumberonesupportforthisresearch 3.MrYudiantoasthecurrentdirectorofPLNforgrantingmethe opportunitytousethecompanyasacasestudyandforprovidingthe dataandinsightsnecessaryforthisresearch. 4.AllfacultymembersoftheMBAprogramatInstitutTeknologiBandung, forknowledgeandcreatingthebestlearningenvironment. 5.MyclassmatesandfriendsfromGM17,formakingthisjourney memorableandenjoyable. 6.ThestaffoftheMBAprogramatInstitutTeknologiBandung,fortheir assistanceanddedicationinensuringtheacademicprocess. 7.Everyonewhohassupportedmeincompletingthisthesis,whosenames Icannotmentionindividuallybutwhosecontributionshavebeengreatly appreciated. 8.Finally,mydeepestgratitudegoestomyfamily,myparents,siblings, andcloserelativesfortheirunconditionallove,support,and encouragement,whichhavebeenasourceofstrengththroughoutthis journey. Iwelcomeanycritiquesandsuggestionsfortheimprovementofthisresearch andhopethatitwillbeusefulforthoseinterestedinthisfield. Jakarta,January2025 HarniAyuSari iii TABLEOFCONTENTS ABSTRACT............................................................................................................2 ABSTRAK.................................................................................................................3 ACKNOWLEDGEMENTS.....................................................................................2 TABLEOFCONTENTS........................................................................................3 LISTOFAPPENDICES.........................................................................................7 LISTOFFIGURES.................................................................................................9 LISTOFTABLES.................................................................................................10 Chapter.IIntroduction............................................................................................1 1.1Background........................................................................................................1 1.2CompanyBackground.......................................................................................3 1.3BusinessIssue....................................................................................................7 1.4ResearchQuestions............................................................................................8 1.5ResearchObjective............................................................................................9 1.6ResearchScopeandLimitation.........................................................................9 Chapter.IILiteratureReview................................................................................10 2.1ProblemExploration........................................................................................10 2.2LiteratureReview............................................................................................14 2.2.1Hydroelectricpowerplant...................................................................14 2.2.2ProjectFinancing..................................................................................18 2.2.3Financingsourcesandscheme.............................................................21 2.2.4Projectfinancingscheme......................................................................22 2.2.5Pre-feasibilitystudy..............................................................................23 2.2.6Feasibility.............................................................................................24 2.2.7DetailedDesign....................................................................................27 2.2.8Financingandcontractualarrangement................................................27 2.2.9Construction..........................................................................................29 2.2.10Commissioning...................................................................................30 2.2.11Operationandmaintenancebudgeting...............................................31 iv 2.2.12InternalFactor.....................................................................................31 2.2.13SensitivityAnalysis............................................................................31 2.2.14WeightedAverageCostCapital.........................................................33 2.2.15CapitalBudgeting...............................................................................34 2.2.16NetPresentValue(NPV):..................................................................35 2.2.17FinancialInternalRateofReturn(FIRR)...........................................36 2.2.18Freecashflowtoequity......................................................................37 2.2.19FreeCashFlowtotheFirm................................................................38 2.2.20PaybackPeriod(PP)...........................................................................39 2.2.21Leveledcostofelectricity(LCOE)....................................................40 2.2.22EmissionRate.....................................................................................40 2.2.23Debtservicecoverageratio................................................................42 2.2.24CapitalExpenditure............................................................................43 2.2.25ExternalFactor...................................................................................44 2.2.26EnvironmentandsocialImpacts.........................................................44 2.2.27InternalCostEstimates.......................................................................46 2.2.28CostOverrun......................................................................................48 2.2.29RiskAnalysis......................................................................................49 2.2.30PESTLEanalysis................................................................................64 2.2.31PoliticalAnalysis................................................................................64 2.2.32EconomicAnalysis.............................................................................66 2.2.33SocialAnalysis...................................................................................67 2.2.34TechnologyAnalysis..........................................................................71 2.2.35LegalAnalysis....................................................................................72 2.2.36EnvironmentAnalysis........................................................................73 2.2.37ProjectOverview................................................................................52 2.2.38RajamandalaProjectOverview..........................................................52 2.2.39ConceptualFramework.......................................................................56 2.2.40Preliminarystudies.............................................................................57 v 2.2.41Externalandinternalanalysis.............................................................57 2.2.42DataAnalysis......................................................................................58 ChapterIIIResearchMethodology.......................................................................60 3.1DataCollection................................................................................................60 3.2ResearchMethodology....................................................................................61 3.3ResearchDesign..............................................................................................62 ChapterIVFindingsandBusinessSolution..........................................................64 4.1Analysis...........................................................................................................64 4.2Solutionandproposedimplementationplan.................................................160 4.3CashflowwithEmissiongeneration.............................................................165 4.4OperationandMaintenance(2019-2023)......................................................168 4.5Productionofelectricityandemission..........................................................170 4.6PPA................................................................................................................171 4.7Cashflowwithoutemission..........................................................................172 4.8Cashflowwithemission................................................................................174 4.9ComparisonofeachFinancialModel............................................................175 4.10Conclusionofcomparisoneachfinancialmodel.........................................180 4.11RiskAnalysis...............................................................................................181 4.12RiskAnalysisFeasibilitystage....................................................................100 4.13RiskMatrix..................................................................................................188 4.14FinancialRiskinCompletionstage.............................................................107 4.15RiskMatrixincompletion...........................................................................199 4.16RiskAnalysisinoperationalstage...............................................................200 4.17RiskAnalysisinoperationandmaintenance...............................................205 4.18ConclusionofRiskAnalysis.......................................................................206 Chapter.VConclusionandRecommendation....................................................208 5.1Conclusion.....................................................................................................208 5.2Implication.....................................................................................................210 5.3Implementation&Recommendation.............................................................211 vi 5.4Limitationandfutureresearch.......................................................................214 REFERENCES....................................................................................................215 APPENDICES.....................................................................................................135 vii LISTOFAPPENDICES AppendixAFeasibilityCashflowyear2012-2023..........................................220 AppendixBcontinuedFeasibilityCashflowyear2023-2043..........................221 AppendixCCompletionCashwihtoutcarboncreditflowyear2011-2023......222 AppendixDcontinuedcompletionCashwihtoutcarboncreditflowyear2024- 2044.....................................................................................................................223 AppendixECompletionCashflowwithEmissionforyear2011-2023............224 AppendixFContinuedcompletionCashflowwithEmissionforyear2011- 2023.....................................................................................................................225 AppendixGOperationandMaintenanceCashflowwithoutEmissionyear 2014-2023............................................................................................................226 AppendixHcontinuedOperationandMaintenanceCashflowwithoutEmission year2023-2044....................................................................................................227 AppendixIOperationandMaintenanceCashflowwithEmissionyear2014- 2023.....................................................................................................................228 AppendixJContinuedoperationandMaintenanceCashflowwithEmission year2023-2044....................................................................................................229 AppendixKUKL-UPLRajamandalaProjectOperationalstage.......................230 AppendixLContinuedUKL-UPL(environmentalinformation).......................231 AppendixMcontinuedUKL-UPL(Airqualityandnoise)................................232 viii AppendixNcontinuedUKL-UPL(Airqualityandnoise)................................233 AppendixOcontinuedUKL-UPL(Waterquality)............................................234 AppendixPcontinuedUKL-UPL(Waterquality)............................................235 AppendixPcontinuedUKL-UPL(landUsage)................................................236 AppendixRcontinuedUKL-UPL(landUsage)................................................237 AppendixScontinuedUKL-UPL(Vegetationrestoration)...............................238 AppendixTcontinuedUKL-UPL(Vegetationrestoration)...............................239 AppendixUcontinuedUKL-UPL(Vegetationrestoration)..............................240 AppendixVcontinuedUKL-UPL(Vegetationrestoration)..............................241 . ix LISTOFFIGURES FigureI.1LevelofAirquality2023.......................................................................4 FigureI.2YearsofFossilFuelleftin2020............................................................4 FigureI.3ProjectFinancerundown.......................................................................6 FigureII.1PLNelectricgenerateplanin2020.....................................................11 FigureII.2PLNelectricGenerationCapacityPlan2029.....................................11 FigureII.3PLNelectricGenerationCapacityPlan2029.....................................15 FigureII.4PLNelectricGenerationCapacityPlan2029.....................................16 FigureII.5PLNelectricGenerationCapacityPlan2029.....................................17 FigureII.6TypicalProjectFinanceStructure.......................................................20 FigureII.7Riskanalysisschemeforinvestorsanddevelopers.............................51 FigureII.8The3riverdamlocated(Cirata,Jatiluhur,sanguling).......................53 FigureII.9Rajamandala’sPowerplantoutline.....................................................54 FigureII.10RajamandaBusinessfundingscheme..............................................54 FigureII.11Singlelinediagram150kVofRajamandalaHydropowerplant.......55 FigureII.12FigureConceptualFrameworkofStudy............................................59 FigureIII.1ResearchDesign.................................................................................63 FigureIV.1Indonesiarenewableenergyinvestment............................................67 FigureIV.2Feasibilityriskbeforemitigation...................................................188 FigureIV.3FeasibilityriskAfterMitigation.....................................................189 FigureIV.4Completionriskmatrixbeforemitigation....................................199 FigureIV.5Completionriskmatrixaftermitigation.........................................200 FigureIV.6Operationandmaintenanceriskmatrixbeforemitigation............205 FigureIV.7Operationandmaintenanceriskmatrixaftermitigation.................206 x LISTOFTABLES TableII.1EmissionratebasedonProvince.........................................................41 TableII.2EnvironmentalandSocialImpactinhydropowerplant......................45 TableII.3Costofelectricitybasedonsizeofpowerplant..................................48 TableII.4RoleofsponsorsinEBT......................................................................68 TableIII.1TypeofDatabeingusedinMethodology..........................................60 TableIV.1Re-modelProjectfinancemodelofRajamandala.............................77 TableIV.2MilestonedateofRajamandala.........................................................82 TableIV.3ConstructionFinancialrundown.......................................................85 TableIV.4MilestonedateLoan...........................................................................94 TableIV.5MilestonedateLoan...........................................................................95 TableIV.6FinancialCostDrawdown..................................................................96 TableIV.7CalculationofDebtandEquity.........................................................97 TableIV.8CalculationofInterestDuringConstruction.....................................98 TableIV.9Calculationofrepaymentschedule..................................................100 TableIV.10Calculationofrepaymentschedule................................................101 TableIV.11FixedandVariableCost.................................................................103 TableIV.12continueFixedandVariableCost..................................................104 TableIV.13ContinuedFixedandVariableCost...............................................105 TableIV.14ListofIntangibleandtangiblecost..............................................107 TableIV.15CalculationsofDepreciationCost.................................................108 TableIV.16CalculationsofDepreciationCost..................................................109 TableIV.17CalculationsofAmortizationCost.................................................110 TableIV.18CalculationsofAmortizationCost.................................................111 TableIV.19ElectricityproductionRajamandala..............................................113 TableIV.20ElectricityproductionRajamandala..............................................114 TableIV.21ElectricityproductionRajamandala...............................................115 TableIV.22ElectricityproductionRajamandala..............................................116 xi TableIV.23DebtServiceCoverageRatioRajamandala...................................119 TableIV.24IRRprojectRajamandala..............................................................120 TableIV.25WACCprojectRajamandala.........................................................120 TableIV.26MileStoneDateDelayRajamandala............................................122 TableIV.27Constructiondelayrundowncost................................................124 TableIV.28MilestoneDateLoandelay...........................................................133 TableIV.29DetailProjectDelayCostdrawdown............................................134 TableIV.30FinancialDelaycostdrawdown....................................................136 TableIV.31CalculationofDelayDebttoEquityRatio...................................136 TableIV.32CalculationofInterestDuringConstructionDelays.....................137 TableIV.33CalculationofDelayRepaymentschedule.................................139 TableIV.34CalculationofDelayRepaymentschedule.................................140 TableIV.35CalculationofFixedandVariableDelaycost.............................143 TableIV.36CalculationofFixedandVariableDelaycost..............................144 TableIV.37CalculationofFixedandVariableDelaycost..............................145 TableIV.38CalculationofDepreciationDelay................................................147 TableIV.39CalculationofDepreciationDelay................................................148 TableIV.40CalculationofAmortizationDelay...............................................149 TableIV.41CalculationofAmortizationDelay...............................................150 TableIV.42ElectricityProductionduringdelay..............................................152 TableIV.43ElectricityProductionduringdelay...............................................153 TableIV.44ElectricityProductionduringdelay...............................................153 TableIV.45DelayedPPAAgreement..............................................................155 TableIV.46DelayedDebtServiceCoverageRatio...........................................157 TableIV.47DelayedIIRCalculation................................................................158 TableIV.48DelayedIIRCalculation................................................................158 TableIV.49RajamandalaEmissionproduction...............................................162 TableIV.50RajamandalaEmissionproduction...............................................163 TableIV.51RajamandalaEmissionproduction...............................................164 xii TableIV.52DebtServicecoverageRatiowithCarbonCredit.........................166 TableIV.53CalculationIRRwithCarbonCredit.............................................166 TableIV.54CalculationWACCandNPVwithCarbonCredit........................167 TableIV.55FactorsthatcangivehighIncreaseofFixedO&Mcost................169 TableIV.56CalculationO&Mduringoperationandmaintenance..................170 TableIV.57Electricityproductionduringoperationandmaintenance............170 TableIV.58Electricityproductionduringoperationandmaintenance............171 TableIV.59Emissionproductionduringoperationandmaintenance..............171 TableIV.60Emissionproductionduringoperationandmaintenance.............172 TableIV.61DebtServiceCoverageRatioduringoperationandmaintenance.173 TableIV.62DebtServiceCoverageRatioduringoperationandmaintenance..174 TableIV.63DebtServiceCoverageRatioduringoperationandmaintenance withcarboncredit................................................................................................175 TableIV.64NPVduringoperationandmaintenancewithcarboncredit.........175 TableIV.65Comparisonofeachfinancialmodel............................................176 TableIV.66RiskAnalysisforFeasibilityStage...............................................184 TableIV.67RiskAnalysisforCompletionStage.............................................191 TableIV.68RiskAnalysisforoperationandMaintenancestage.....................201 TableV.1ImplementationplanofRajamandalacase........................................211.