Danantara urged to shift SOE capital toward renewables

Indonesia’s $900b sovereign wealth fund could strengthen dividends and fiscal resilience, the report said.

Indonesia’s sovereign wealth fund Danantara could play a transformative role in the country’s energy transition if it redirects investment toward renewable energy and addresses structural weaknesses in its revenue model, according to the Institute for Energy Economics and Financial Analysis.

IEEFA said Danantara, formally known as Badan Pengelola Investasi Daya Anagata Nusantara, holds $900b in assets under management and ranks as the world’s eighth-largest sovereign wealth fund.

However, its dividend model remains constrained, with state-owned enterprise (SOE) contributions consistently falling short of the government’s annual target of IDR800t, or $46.7b.

The report said the financial performance of major energy SOEs remains heavily dependent on government support. Subsidies and compensation for Pertamina and PLN reached IDR374t, or $23.6b, more than double the dividend contributions from the seven leading SOEs.

Without this support, IEEFA said both companies would record negative net income, weakening their capacity to pay dividends to Danantara.

Pertamina and PLN also remain exposed to coal and imported oil and gas, leaving them vulnerable to global price volatility and exchange-rate fluctuations. Renewables, by contrast, are domestically available, have no fuel costs, and carry lower currency risk, offering a more stable long-term pathway.

IEEFA said Danantara could improve its current dividend model by investing in renewable energy, transmission networks, and the electric vehicle supply chain. 

These could include battery manufacturing and recycling, charging infrastructure, and the electrification of public transport, particularly buses and logistics fleets.

The report also recommended that Danantara help develop credible carbon markets, use blended finance mechanisms such as the Just Energy Transition Partnership, and expand green bond financing.

IEEFA cited Singapore’s Temasek as a possible model, noting how its energy-focused portfolio company Sembcorp Industries benefited from a focused energy transition strategy. It said Sembcorp’s stock price has risen about 217% from 2021 levels.

IEEFA said reforms could help reduce subsidy dependence, improve SOE efficiency, accelerate renewable energy investment, and strengthen Indonesia’s energy security, whilst supporting the country’s Golden Vision 2045 and 8% economic growth target.