On January 19, 2016, the Government of the Republic of Indonesia (GoI) promulgated Presidential Regulation No. 4 of 2016 concerning Acceleration of Electricity Infrastructure Development (“PR 4/2016”). The issuance of PR 4/2016 is part of the GoI’s commitment to ensure the success of its 35,000 MW program.
PR 4/2016 outlines the rules of the game for the implementation of the Electricity Infrastructure Development (EID) by PT Perusahaan Listrik Negara (Persero) (PLN). It provides PLN with two options in managing the EID projects: by self-managing or by way of electricity supply cooperation through PLN’s subsidiary or with power plant developers (PPDs). The first option of self managing may be taken if the following conditions are met: (i) PLN has the financing capability to fund the equity and the project is has low cost fund resources, (ii) the construction risks are low, (iii) availability of the fuel supply, (iv) availability of a peaker to ensure a reliable operation and/or (v) development of an isolated system.
Electricity supply cooperation through PLN’s subsidiary is applicable if PLN plans to cooperate with a foreign state-owned company through a joint venture. The cooperation with the foreign state-owned company is to be made for the purpose of obtaining funding and/or energy supply for the implementation of the EID.
The cooperation with PPDs is applicable to electricity infrastructure projects which meet the criteria of requiring vast funding, having high construction and infrastructure risks, and requiring high fuel supply, new and renewable energy power plant, the expansion of an existing power plant owned by a PPD and/or the development of a power plant in a new location by several PPDs.
Both options of self managing and the electricity supply cooperation are eligible for a government guarantee. For the guarantee, the President Director of PLN is to submit an application letter to the Minister of Finance. The implementation provisions on the government guarantee will be issued by the Minister of Finance.
The GOI shows its support by stipulating in the PR 4/2016 the prioritization of the utilization of new and renewable energy for the implementation of the EID, and the provision of easy processes of the licenses and permits through the One Stop Services (PTSP) of the Investment Coordinating Board (BKPM). PR 4/2016 also stipulates the prioritization of the GOI’s land procurement for the EID.