The Minister of Energy and Mineral Resources (“MEMR”) sets main provisions that shall be included in the Power Purchase Agreement/Perjanjian Jual Beli Tenaga Listrik (“PPA”) between State Electricity Company/PT Perusahaan Listrik Negara (Persero) (“PT PLN”) as buyer and business entities as seller.
Such main provisions are contained in MEMR Regulation Number 10 of 2017 on Main Provisions for Power Purchase Agreements (“MEMR Reg 10/2017”) as amended by MEMR Regulation Number 49 of 2017 on the Amendment to Ministry of Energy and Mineral Resources Regulation Number 10 of 2017 on Main Provisions for Power Purchase Agreements (“MEMR Reg 49/2017”) and re-amended by MEMR Regulation Number 10 of 2018 on the Second Amendment to Ministry of Energy and Mineral Resources Regulation Number 10 of 2017 on Main Provisions for Power Purchase Agreements (“MEMR Reg 10/2018”), which hereinafter are collectively referred to as the “Regulation”.
The Regulation governs all types of power plant excluding intermittent-based power plants powered by new and/or renewable energy, hydro power plants under 10 MW (ten megawatts), biogas power plants and waste-to-energy power plants. PPA shall at least cover the following provisions:
Maximum PPA Period is 30 (thirty) years starting from Commercial Operation Date (“COD”).
PPA is arranged by using Build, Own, Operate and Transfer (BOOT) mechanism.
Rights and Obligations of the Parties
Business entities have rights as follows:
Business entities are obliged to:
PT PLN has rights as follows:
PT PLN is obliged to:
The risks that shall be borne by PT PLN cover:
The risks that shall be borne by business entities cover:
Performance securities consist of 3 (three) stages:
Commissioning and Commercial Operation Date
Business entities may accelerate the execution of the COD that has initially been planned for which they are entitled to get incentives. The incentives shall be agreed upon by both PT PLN and business entities in a business-to-business basis.
If a business entity causes a delay in COD, PT PLN is entitled to charge a liquidated damage penalty.
The fuel supply can be provided either by PT PLN or business entities.
If the fuel supply is provided by PT PLN, the supply shall meet the following terms:
The Dispatcher shall prepare a plan and execute a dispatch in order to obtain a reliable electricity supply. Plans and execution of the dispatch shall be conducted by considering the costs and technical operations of the power plant.
Monthly dispatch for every power plants must be declared and reported to the Directorate General of the Electricity, and such report includes the violations of the Grid Code.
Penalty for Power Plant Performance
Penalties comprises the following:
Termination of PPA
Termination of PPA may occur due to the following reasons:
Termination by one of the parties can be conducted in case, among others:
The termination of the PPA must be reported to the Directorate General of Electricity.
Transfer of Rights
It is prohibited to transfer the ownership of the buiness entities before the power plant achieves COD unless the transfer of ownership is carried out to an affiliate whose 90% of shares are owned by the business entities.
The transfer of ownership after achieving the COD can be carried out after obtaining a written approval from PT PLN.
Transfer of rights shall be reported to the Directorate General of Electricity. This provision does not apply to geothermal power plants.
Price Adjustment Requirements
The adjustment of the power selling price can be conducted if there is a change in:
Any disputes shall be resolved through either of the folowing mechanisms:
The award stipulated by the Arbitration Agency is the final and binding decision.
The parties are exempted from their obligations in the event of force majeure, which (in this case) is limited to Natural force majeure;
If a natural force majeure causes a delay in COD execution, the COD execution may be extended in accordance with the duration of the natural force majeure, including the time required to perform any repairments to a project, if this is deemed necessary.
If a natural force majeure causes electriciity to not be transmitted, the PPA may be extended in accordance with the duration of natural force majeure.
Other provisions that have not been included under this Regulation will further be regulated in the business-to-business-based PPA between the Parties.
ADCO Law earns the trust to represent clients from multinational companies to emerging entities across a wide range of industries to achieve their business objectives in Indonesia.
By combining commercial sensibilities and legal expertise, ADCO as a Law Firm Jakarta assists the clients to structure, organize and implement their business ventures and investments, including structuring, financing and securing investments as well as establishing new foreign companies in Indonesia. Should you have more queries regarding this matter, please do not hesitate to contact us.
@2020 ADCO Law. All rights reserved.
This publication has been prepared by Aditya Yudhistira for general informational purposes only to provide clients with information on recent legal developments and is not intended as legal advice or opinion.