On January 19 2016 the government promulgated Presidential Regulation 4/2016 on Acceleration of Electricity Infrastructure Development as part of its commitment to ensuring the success of the 35,000-megawatt programme.

Regulation

Regulation 4/2016 outlines the rules for the implementation of the Electricity Infrastructure Development (EID) by PT Perusahaan Listrik Negara (Persero) (PLN). It provides PLN with two options for managing EID projects: by way of self-management or by way of electricity supply cooperation through PLN's subsidiary or with power plant developers.

PLN may choose the self-management option if the following conditions are met:

  • it has the financial capability to fund the equity and the project has low-cost fund resources;
  • the construction risks are low;
  • there is an available fuel supply;
  • a peaker is available to ensure reliable operation; and
  • an isolated system has been developed.

Electricity supply cooperation through PLN's subsidiary will apply if PLN plans to cooperate with a foreign state-owned company through a joint venture to obtain funding or energy supply for the implementation of the EID.

Cooperation with power plant developers will apply to electricity infrastructure projects that:

  • require vast funding;
  • have high construction and infrastructure risks; and
  • require a high fuel supply, a new renewable energy power plant, the expansion of an existing power plant owned by a power plant developer or the development of a power plant in a new location by several power plant developers.

Both options of self-management and electricity supply cooperation are eligible for a government guarantee. For the guarantee, PLN's president director must submit an application letter to the minister of finance, who will issue the implementation provisions for the guarantee.

Comment

Regulation 4/2016 shows the government's support for the prioritisation of new and renewable energy for the implementation of the EID and the provision of easy licence and permit processes through the Investment Coordinating Board's one-stop services. The regulation also stipulates the government's prioritisation of land procurement for the EID.

For further information on this topic please contact Serafina Muryanti Hayu P at Ali Budiardjo, Nugroho, Reksodiputro by telephone (+62 21 250 5125) or email (smuryanti@abnrlaw.com). The Ali Budiardjo, Nugroho, Reksodiputro website can be accessed at www.abnrlaw.com.

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