Established on 24 February 2025, Indonesia’s sovereign wealth fund (SWF), Badan Pengelola Investasi Daya Anagara Nusantara (Danantara), is mandated to enhance state revenue and strengthen the national economy. With approximately USD900 billion in assets under management, Danantara ranks as the world’s eighth-largest SWF. Its revenue model relies on optimising returns from state-owned enterprises (SOEs), primarily through dividends.

Key findings

Danantara faces a structural challenge as SOE dividend contributions consistently fall short of the government’s ambitious annual target of IDR800 trillion (USD46.7 billion). The financial performance of energy SOEs remains heavily dependent on government support; in 2024, subsidies and compensation for Pertamina and PLN totalled IDR374 trillion (USD23.6 billion), which is more than double their combined dividend contributions. Without this support, both companies would record negative net income, diminishing their dividend capacity.

Executive summary

To meet fiscal expectations, the fund must pursue complementary strategies through its two holding entities. Danantara Asset Management (DAM) should optimise SOE performance, while Danantara Investment Management (DIM) should reinvest capital into projects exceeding a 5% minimum return rate. A 5% return on current assets would generate USD45 billion annually. In 2024, total dividends increased to IDR145 trillion, with the Government of Indonesia receiving IDR85 trillion, though this remains far below stated targets.

Unlocking Indonesia’s golden vision 2045 through Danantara

Under Law No. 1/2025, Danantara acts as a strategic investment authority mandated to enhance investment value and productivity. It has broader responsibilities than the Indonesia Investment Authority (INA), as it actively optimises national assets across several sectors. These initiatives align with the Golden Vision 2045 to achieve economic sovereignty and an 8% economic growth target.

Danantara’s funding model and strategic mandate

Unlike many global SWFs funded by commodity revenues, Danantara relies on consolidated SOE dividends and market-based instruments. DIM strengthens global partnerships and secured 11 international Memorandums of Understanding worth IDR346 trillion in its first year. DAM serves as a superholding for SOEs, with plans to reorganise 1,068 SOEs into 221 entities within the next three to four years to streamline portfolios and foster growth in strategic industries.

The challenge for Danantara’s dividend mandate

Historically, dividend contributions from the “Magnificent 7” leading SOEs have never achieved the IDR800 trillion target. In 2022, consolidated SOE assets generated a return on assets of only 3.15%. Although dividends rose to IDR145 trillion in 2024, they were effectively funded by the government’s budget via subsidies to energy entities, undermining the sustainability and quality of these contributions.

Energy sector reforms for sustainable dividends

The energy sector is central to Indonesia’s financial administration, but SOEs in this sector are experiencing accumulated net losses rather than sustainable profits. Dependence on government fiscal support weakens Danantara’s ability to deliver its goal of strengthening fiscal resilience. Pertamina and PLN must navigate public service obligations while operating under regulated or capped prices that constrain commercial performance.

Assessment of Pertamina’s financial performance

Pertamina’s performance is impacted by regulated fuel prices and a heavy reliance on imported crude oil and refined products. In 2024, its Cost of Goods Sold (COGS) reached IDR844 billion, accounting for 70% of revenue. Direct materials comprise 46.2% of total expenses. Increased fuel imports, which rose to 182.1 million barrels in 2024, leave the company exposed to significant risks from global price volatility and supply chain disruptions.

Assessment of PLN’s financial performance

PLN’s cost structure reveals a high dependence on energy inputs, with fuel and lubricants accounting for 33% of operating expenses. The utility is heavily reliant on coal, which accounts for 66.52% of total electricity production. Generation costs surged from IDR637 per kilowatt-hour (kWh) in 2020 to IDR941/kWh in 2024, representing a 48% increase driven by obsolete infrastructure and higher operational expenses.

Transitioning to renewable energy for fiscal sustainability

Energy sector SOEs are exposed to exchange rate risks as coal, oil, and gas costs are dollar-denominated. Since 2018, the Indonesian Rupiah has depreciated by 26% against the US dollar. Conversely, renewables are domestically available, have no fuel costs, and are not linked to currency fluctuations. Shifting towards clean energy would reduce dependence on volatile fossil fuel markets and improve financial stability.

Investment trends and experiences from global SWFs

Global funds like Saudi Arabia’s PIF and Abu Dhabi’s Mubadala have responded to market shifts by accelerating diversification into renewables. Between January 2022 and March 2023, all SWF energy investments were in renewables, with no allocations to oil and gas. This strategic shift aligns with global decarbonisation trends and improves access to green financing instruments with lower financing costs.

Temasek’s strategic shift to accelerate energy transition

Singapore’s Temasek has embedded sustainability in its portfolio strategy to ensure long-term value creation. It introduced an internal carbon price, which increased to USD65/tCO2e as of April 2024. Its subsidiary, Sembcorp Industries, shifted from natural gas to renewables, increasing its renewable revenue share from 6% in 2021 to 12% in 2024. This transition resulted in a 26% CAGR in market capitalisation, significantly outpacing its peers.

Danantara’s energy transition: Current position

Danantara has supported major SOE consolidations, including the formation of Pelindo and MIND ID. For energy transition, DIM has collaborated with ACWA Power on projects including green hydrogen and water desalination. However, the fund is currently focused on waste-to-energy (WtE) projects, which have long development timelines of four to seven years. Renewables like utility-scale solar, which take only 6 to 12 months to complete, are not yet prioritised.

Conclusion

Danantara must reorient the SOE ecosystem towards profitability to ensure long-term viability. Recommended strategic actions include driving portfolio diversification into solar, wind, and battery storage, and accelerating electric vehicle ecosystems through battery manufacturing investments. Collaborating on regional financing platforms and integrating transmission infrastructure for clean energy will be essential for Indonesia to achieve its 8% economic growth target and Golden Vision 2045.