Independent Power Producers Face Risks under New Power Purchase Regulation

The Minister of Energy and Mineral Resources recently issued Regulation No. 10 of 2017 on the Principles Governing Power Purchase Agreements ("MEMR 10") as part of its efforts to overcome persistent delays in the closing of Power Purchase Agreements ("PPA") between Independent Power Producers ("IPP"), the sellers of electricity, and state power utility Perusahaan Listrik Negara ("PLN"), as the buyer. From the Government's perspective, MEMR 10 is intended to provide greater certainty and thus help reduce the time needed for negotiating PPAs. The ultimate question, however, is whether MEMR 10 will actually expedite the signing of the PPAs or is it skewed to the benefit of PLN, thus potentially lessening the appetite of IPPs and their lenders to invest in projects promoted by PLN?