Growing Electricity Demand in Indonesia

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Noreen Tabitha Eaton
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1 Investing in Power Sector New Policy On Compulsory Land Acquisition, Tariff And Process to Obtain Permits Prepared for iadvisory Indonesia 2015 Presentation by Kanya Satwika & Ibrahim Sjarief Assegaf Designation Lawyer Contact details &

15 Prepared for iadvisory Indonesia 2015 Presentation by Kanya

2 Growing Electricity Demand in Indonesia Twh Source: RUPTL

3 Fast Track Program 1 & 2 Schedule of Commencement Scheduled of Completion FTP 1 (10,000 MW) Completion Rate 40% - July % - End of % - July 2014 Issues Source: The Jakarta Post FTP 2 (10,000 MW) (Delayed due to the completion of FTP-1) 2010 (Extended to 2014) 2015 (Extended to 2020) Equipment availability; Land acquisition; Funding (Planned) 46% - End of 2016 Access to site conservation

MW) 2007 2010 (Delayed due to the completion of FTP-1) 2010 (Extended to 2014) 2015 (Extended to 2020)

4 Electricity Supply Business Plan (RUPTL) ( ) The Minister of Energy and Mineral Resource has issued a Minister Decree No K/21/MEM/2015 dated 12 January 2015 on the approval of RUPTL Development Program of 35,000 MW for period of

0074 K/21/MEM/2015 dated 12 January 2015 on the approval of RUPTL

5 Significant Factors in the Development of 35,000 MW Program 1. Provision of land; 2. Pricing/Tariff Policy; 3. Direct Appointment and Direct Selection of IPP; 4. One-Stop Integrated Services (Licensing); 5. Developer and Contractor s Performance; 6. Project Management; 7. Cross-Sector Coordination; and 8. Other Legal Issues.

Direct Appointment and Direct Selection of IPP; 4.

Compulsory Land Acquisition: A timeline Basic Agrarian Law GR 39/1973 GR 55/1993 PR 55/2005, PR 65/2006 1960

6 Compulsory Land Acquisition: A timeline Basic Agrarian Law GR 39/1973 GR 55/1993 PR 55/2005, PR 65/ Compulsory land acquisition Law 2/2012, implementing regulations up to 2014 PR 30/2015

1973 1993 2005 2012 2015 Compulsory land acquisition

Ordinary vs Compulsory Land Acquisition A balancing act between compulsory and voluntary Process and timetable Clearer processes and time table (including court proceedings) for each process

7 Ordinary vs Compulsory Land Acquisition A balancing act between compulsory and voluntary Process and timetable Clearer processes and time table (including court proceedings) for each process Compulsory vs voluntary Site stipulation subject to government and court appeals (if any). Final and binding once resolved. Valuation and compensation Referenced to market price by independent appraiser but subject to negotiation and court may impose immaterial damages. Ganti untung, not ganti rugi

to government and court appeals (if any). Final and binding once resolved.

8 Features in the 2015 Regulation New eligible acquiring entity: authorized private entities - what constitutes as kuasa/authorized? New financing structure: reimbursement once acquisition is completed; may be as investment returns Dealing with incomplete acquisitions Applies only for government projects commencing prior to 2012, which by Dec 2014 is 75% completed. If less?, either use 2005 regulation or restart from site stipulation phase As of implementation phase (site plan is final and binding) Extension of 2 years but as of when? If site stipulation expires?

Applies only for government projects commencing prior to 2012, which by Dec 2014 is 75% completed. If less?

9 Characteristic of the New Regulations Prior to the New Regulations Need to obtain various permits from various government agency and local government Negotiated tariff with PLN and mandatory approval from MEMR After the New Regulations One-stop service in BKPM to obtain permits from the government. Local government approval is still being processed separately. Introducing ceiling tariff. If the negotiated tariff is within the ceiling, MEMR approval is not needed Tariff above ceiling must be approved by the Minister (MEMR 3/2015) Tariff adjustment is regulated

from the government. Local government approval is still being processed separately. Introducing ceiling tariff.

10 Electricity Tariff Policy Payable by PLN Electricity generated from Sourced from Geothermal Power Plant and Geothermal Steam (MEMR Regulation No. 17/2014) Electricity generated from Hydro Power Plant (MEMR Regulation No. 12/2014 as amended by MEMR Regulation No. 22/2014) Electricity generated from Mine-Mouth Power Plants, Coal-Fired Power Plants, Gas-Fired Power Plants/Dual-Fuel Power Plants and Hydro Power Plants (MEMR Regulation No. 3/2015) Electricity generated from the Renewable Energy in Small Scale and Medium-Scale and Excess of Electricity (MEMR Regulation No. 4/2012)

22/2014) Electricity generated from Mine-Mouth Power Plants, Coal-Fired Power Plants, Gas-Fired Power Plants/Dual-Fuel Power Plants and Hydro

11 Delegation of Authority from Minister of Energy and Mineral Resources to BKPM The BKPM, acting on behalf of the MEMR, is granted the authority to issue 10 (ten) types of license/approval, namely: 1) Electrical Power Supply Licenses / Izin Usaha Penyediaan Tenaga Listrik; 2) Operating Licenses / Izin Operasi; 3) Work Area Determinations / Penetapan Wilayah Usaha; 4) Power Support Service Licenses / Izin Usaha Jasa Penunjang Tenaga Listrik; 5) Cross-border Power Purchase & Sale Licenses / Izin Jual Beli Tenaga Listrik Lintas Negara; 6) Power Network Utilization for Telecommunications, Multimedia and Informatics/Izin Pemanfaatan Jaringan Tenaga Listrik Untuk Kepentingan Telekomunikasi, Multimedia dan Informatika; 7) Geothermal Preliminary Survey Assignments / Penugasan Survei Pendahuluan Panas Bumi; 8) Geothermal Licenses / Izin Panas Bumi; 9) Geothermal Support Service Approvals / Persetujuan Usaha Penunjang Panas Bumi; and 10) Explosives Storage Licenses for the Geothermal Industry / Izin Penggunaan Gudang Bahan Peledak Panas Bumi.

/ Izin Usaha Jasa Penunjang Tenaga Listrik; 5) Cross-border Power Purchase & Sale Licenses / Izin Jual Beli Tenaga Listrik Lintas Negara; 6) Power Network Utilization for Telecommunications,

12 Procedure Electricity Business License ( IUPTL ) Application Submission to BKPM (IUPTL- Interim) Issuance of IUTPL - Interim Power Purchase Agreement Application of the IUPTL to BKPM Issuance of IUPTL Price Negotiation With PLN Other permits required: 1. Location Permit 2. Forest Location Permit 3. Environmental Permit 4. Land Acquisition

the IUPTL to BKPM Issuance of IUPTL Price Negotiation With PLN Other permits

Direct Offer (Pemilihan Langsung) and Direct Appointment (Penunjukan Langsung) Process Maximum 45 Days Direct Offer Direct Appointment Due Diligence (Technical and

13 Direct Offer (Pemilihan Langsung) and Direct Appointment (Penunjukan Langsung) Process Maximum 45 Days Direct Offer Direct Appointment Due Diligence (Technical and Financial) by Procurement Agent appointed by PLN* Maximum 30 Days Signed PPA *The procedure of the Direct Offer and Direct Appointment will be further regulated by PLN

and Financial) by Procurement Agent appointed by PLN* Maximum 30 Days Signed PPA

14 Delegation of Authority PROS Focus on power and infrastructure sector Streamline licensing process Coordination with the other 22 Ministries Online system and monitoring CONS Comprehensive implementing regulations is essential Approval from local government is still required

Ministries Online system and monitoring CONS Comprehensive

CREAT THE INVESTMENT CLIMATE FOR ENSURING THE OIL AND GAS INDUSTRY SUPPORT Director of Agribusiness Industry Planning and Other Natural Resources

invest in CREAT THE INVESTMENT CLIMATE FOR ENSURING THE OIL AND GAS INDUSTRY SUPPORT Director of Agribusiness Industry Planning and Other Natural Resources BKPM Jakarta, 14 April 2015 2015 by Indonesian