Legal Issues on 35,000 MW Power Plant Development in Indonesia
1. Legal Issues on 35,000 MW
Power Plant Development
in Indonesia
Indrawan D. Yuriutomo
October 12, 2016
SSEK Legal
Consultants
2. I
During 70 years of Indonesian
independence, only 50,000 MW
power plants were built
Jokowi in the National Coordination Meeting (“Rakornas”) – Regional Inflation Control Team at the Hotel Grand
Sahid, Jakarta Pusat (27/5/2015)
3. I Legal Basis of Power Plant Development
35.000 MW
1. Law No. 30 Year 2009 on 23 September 2009 regarding Electricity;
2. Government Regulation No. 14 Year 2012 as amended by Government
Regulation No. 23 Year 2014 regarding Electricity Supply Business
Activities ;
3. Presidential Decree No. 4 of 2016 on 19 January 2016 regarding
Electricity Infrastructure Development Acceleration;
4. Minister of Finance Regulation No.130/PMK.08/2016 regarding the
Procedure of the Implementation in the Granting of Government
Guarantee for Electricity Infrastructure Development Acceleration.
4. II ELECTRICITY NEEDS IN INDONESIA
Electricity needs in Indonesia in 2015 was 36.787 MW,
and it has been projected to be increased to become
50.331 MW in 2019 and to become 74.536 MW in 2024.*
To fulfill such needs, PLN can conduct cooperation with
Independent Power Plant (“IPP”) with Build-Own Transfer
(“BOT”) scheme through Power Purchase Agreement
(“PPA”)
* PLN Official website
5. III THE POTENTIAL FOR IPP INVESTMENT IN
INDONESIA
Project for 35.000 MW applied by the Government in 2015
consists of 10.000 MW will be built by PLN and 25.000 MW
built by the private party. Project built by the private party
shall consist:
Project which its procurement has already been running: 21
Project;
Project which its procurement through direct appointment :
16 projects;
Project which its procurement through tender: 37 Projects.
* PLN Official website
7. License &
Agreement
EPC
Contract
V BUSINESS SCHEME
Land Owner
Fuel Supplier
PSC
Contractor
Land
Sale
Purchase
Deed
Tanah
Fuel
Agreement Seller
Insurance
Contract
Insurance
Company
Loan
Agreement
O & M
Contract
Bank
Government
O & M
Company
POWER
PURCHASE
AGREEMENT
8. VI PPA OVERVIEW (1)
1. PPA (Power Purchase Agreement)
2. FC (Financing Date)
3. COD (Commercial Operation Date)
Period of
Fund
Period of
Construction
Period of
Operation
12 Months
24/36/48
Month
25-30 Years
CODFDPPA
PPA
Expire
Date
9. VII UNDERWRITING
4 (four) Types of Underwriting for IPP
Support Letter
granted pursuant
to Keppres No. 37
Year 1992.
Applicable to IPP
Generation I or 27
PPA
Content:
Government will
cause PLN to
satisfy its
obligations
Confirmation Note
granted pursuant to
UNMU signed by GOI
dan GOJ pada 17-9-
2006
Aimed for IPP project
funded by JBIC
Content: GOI
Obligation Confirmation
to provide subsidy to
PLN
Guaranty Letter
granted pursuant to
Keppres No. 67
Year 2005
Aimed for Proyek
PPP Project and
must be through
tender
Content: GOI
provides
compensation if PLN
incapable of paying
to IPP
Business Feasibility
Guaranty Letter granted
diberikan pursuant to
PMK 225 Year 2013
Aimed for Acceleration
Project II and 10.000
MW Project
Content: GOI menjamin
kemampuan PLN untuk
melaksanakan
kewajiban finansialnya
10. VIII LEGAL DISPUTE IN POWER PLANT DEVELOPMENT
IN INDONESIA
1. Land Procurement
Government effort to assist IPP in the process of land procurement is by issuing
Presidential Decree No. 38 Year 2015 where land procurement for the PPP
project shall constitute the Government obligation, and issuing the Government
Regulation No. 30 Year 2015, regarding the implementation of land
procurement for development of public interest.
Special for land procurement located in the jungle area, the Government has
issued the Minister Regulation LHK No. P.46 Year 2016 regarding the utiliation
of geothermal environment services in the national park, grand forest park and
national park.
However, the land procurement for the project that has been running and not in
the PPP scheme, how does the government effort assisting this process?
11. VIII LEGAL ISSUES IN POWER PLANT DEVELOPMENT IN
INDONESIA
2. Government Guarantee
The Government currently provides Guarantee such as:
Business Feasibility Guarantee Letter (Minister of Finance Regulation No. 225 Year
2013 as amended by the Minister of Finance Regulation No. 173 Year 2014), shall
be granted for the second 10.000 MW Acceleration Project.
Guarantee through PT Penjaminan Infrastruktur Indonesia (Presidential
Regulation No. 78 Year 2010 and the Minister of Finance Regulation No. 260 Year
2010, shall be granted for the project built through PPP scheme.
Can ongoing projects that are not included in the two qualifications above obtain
the government guarantee?
12. VIII LEGAL DISPUTE ON POWER PLANT DEVELOPMENT
IN INDONESIA
3. Selling Price of Electricity
To expedite the negosiation process, the Government issues the Minister Regulation
of ESDM No. 3 Year 2015 for selling price of electricity from PLTU Mine Mouth, PLTU
Coal, PLTG/PLTMG and PLTA shall be determined by the highest check price, i.e., the
price when the Commercial Operation Date falls.
If the agreed price is equal to or below the highest check price, an approval may not
be required from the Minister of ESDM. However, for certain areas, PLN can make
a purchase with the price exceeding the highest check price that is required to
obtain the approval of the Minister of ESDM.
Electric power that comes from the geothermal shall be regulated by the Minister
Regulation of ESDM No. 17 Year 2014.
13. IX
First power plant operated in megaproject 35
thousand megawatt (MW), that is Gas Power Plant
Pembangkit Listrik Tenaga Gas (PLTG) Gorontalo
Saturday (16 January 2016) at 12.30 WITA, PLTG
Gorontalo has finally entered into Sulutgo electric
system interconnection with the power 25 MW
14. IX
Luhut forced Jokowi to confess target failure 35.000 MW
finished in 2019
Merdeka.com - The government started to be pessimist where 35.000 megawatt (MW) project
will successfully meet the deadline according to the target in 2019. The project is still facing two
major hindrances such as land acquisition and project location determination.
Minister of Energy and Mineral Resources, Luhut Binsar Panjaitan has admitted that even though
mega project 35.000 MW is unable to reach the goal in 2019, however, the government is still
striving to make the project successful.
“We estimate the project will be finished in 2010. We cannot lie. President must inform it. If we
received the correct data, then the policy will be enormous.” said the Minister Coordinator Luhut
at the University of Indonesia, Depok, on Wednesday (7/9).
Luhut who is also served as the minister of coordinator of maritime affirms that the remaining
capacity for 10.000 MW will be built as electricity capacity reserve. He also predicted that this
mega project will be realized in 2020. “Electricity for 35.000 MW is truly unreachable in 2019. A
number of process business are still ongoing. At least only 23.000 until 24.000 MW is successful.
But that is fine. We already work hard," Luhut said.
