Investing in Power Sector New Policy On Compulsory Land Acquisition, Tariff And Process to Obtain Permits 30.04.15 Prepared for iadvisory Indonesia 2015 Presentation by Kanya Satwika & Ibrahim Sjarief Assegaf Designation Lawyer Contact details & ibrahim.assegaf@ahp.co.id
Growing Electricity Demand in Indonesia 500 450 400 350 300 250 200 150 100 50 0 2014 2015 2016 2018 2020 2022 2024 Twh Source: RUPTL 2015-2019
Fast Track Program 1 & 2 Schedule of Commencement Scheduled of Completion FTP 1 (10,000 MW) Completion Rate 40% - July 2012 48% - End of 2012 73% - July 2014 Issues Source: The Jakarta Post FTP 2 (10,000 MW) 2007 2010 (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
Electricity Supply Business Plan (RUPTL) (2015 2029) The Minister of Energy and Mineral Resource has issued a Minister Decree No. 0074 K/21/MEM/2015 dated 12 January 2015 on the approval of RUPTL 2015 2029. Development Program of 35,000 MW for period of 2015 2019
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.
Compulsory Land Acquisition: A timeline Basic Agrarian Law GR 39/1973 GR 55/1993 PR 55/2005, PR 65/2006 1960 1973 1993 2005 2012 2015 Compulsory land acquisition Law 2/2012, implementing regulations up to 2014 PR 30/2015
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
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?
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
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)
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.
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
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
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