Professional Documents
Culture Documents
Jakarta
Tender is required
Before the issuance of Reg. 17/2013, PT PLN (Persero) ("PLN") - the
electricity oftaker in Indonesia - was allowed to purchase electricity from solar
power projects through a direct appointment (without a tender). Reg. 17/2013,
which only obliges PLN to purchase electricity generated from capacity quota
winning bidders, suggests that the only mechanism for PLN to purchase
power from solar photovoltaic power plants is through capacity quota tenders
using the procedures set out under Reg. 17/2013, i.e., direct appointment is
no longer allowed.
We were informed by officials from EBTKE that the initial capacity quota will
be issued within two to three months after issuance of Reg. 17/2013. The
sizing of the projects to be offered as part of the annual quota will be
dependent, amongst other things, on the load demands in the relevant area
as well as the capacity of available transmission and distribution grids to
accept the power. If the quota establishes a long list of small scale projects
(e.g. 1-5MW), it may render them unattractive to large international solar
developers.
Finance & Projects
In our discussions with officials from EBTKE, we were informed that the
tender committee will set a minimum score that a bidder must achieve in the
first envelope evaluation. The tender committee then will only open the
second envelope of the bidders who pass the first envelope evaluation.
Three bidders with the lowest bid tariff who have passed the first envelope
evaluation will be invited to the evidentiary and clarification session. A bidder
who fails to prove authenticity of documents submitted in the bid in this
session will be disqualified.
It is not clear from Reg. 17/2013 whether the determination of the winning
bidder should be solely based on the lowest bid tariff. However, the officials of
EBTKE explained to us that the bidder with the lowest bid tariff will be
appointed as a winning bidder regardless of its score from the first envelope
evaluation because only bidders who have passed the threshold score in the
first envelope evaluation will continue to the second envelope evaluation. If
however there is more than one bidder who submitted the lowest bid tariff, the
score from the first envelope evaluation will be considered to determine the
winning bidder.
There is also an objection period, which is five working days after the
announcement of the winning bidder.
The entire tender process from tender announcement up to the end of the
objection period will take around 47 days.
2 Introduction of Solar Power Feed-In-Tariff and New Solar Power Purchase Procedures In Indonesia July 2013
Finance & Projects
According to the officials of EBTKE who believe that a foreign entity can bid
as a consortium, after the consortium is determined as the winning bidder, the
consortium must form an Indonesian legal entity engaging in the electricity
supply sector before the signing of the Power Purchase Agreement ("PPA")
and this new entity will sign the PPA with PLN. But, the officials explained, it is
not necessary for the Indonesian legal entity to be established before
issuance of the the MEMR Assignment Letter (explained below).
Whether in fact EBTKE will allow a foreign entity to bid or whether the MEMR
will allow the Indonesian legal entity engaging in the electricity supply sector
to be established only when the PPA is about to be signed can only be tested
when a capacity quota tender is actually held, and the detailed bid documents
issued.
New Feed-in-tariff
In addition to introducing new procedures for purchase of electricity from solar
power projects, Reg. 17/2013 also introduces a ceiling feed-in-tariff for solar
photovoltaic power projects in Indonesia at US$0.25/kWh, or US$0.30/kWh if
the photovoltaic module uses local components of 40% or more.
Reg. 17/2013 does not provide details of how to determine the lower tariff
where a bidder who meets the minimum 40% local content requirement bids a
higher tariff compared to bid tariff than another bidder who does not fulfill the
minimum 40% local content requirement.
From our discussion with officials at EBTKE, in determining which bid tariff is
lower, EBTKE will impose a US$0.05/kWh tariff adjustment on the tariff
submitted by the bidder who meets the minimum local content requirement.
Please see the illustration table below:
3 Introduction of Solar Power Feed-In-Tariff and New Solar Power Purchase Procedures In Indonesia July 2013
Finance & Projects
Final tariff
The tariff from the tender will be stipulated in an assignment letter from the
MEMR and this tariff will be used in the PPA without any further negotiation
with PLN. Reg. 17/2013 mentions that the initial term of the PPA is 20 years
but it can be extended.
No Indexation?
What is not clear is whether Reg. 17/2013 gives PLN the flexibility to agree
tariff indexation as part of the detailed PPA wording (i.e. the tariff from the
tender is simply the base tariff which can be escalated over time). As a
comparison, the feed-in-tariff regulation for geothermal power projects also
does not expressly provide for the tariff to be indexed over time, but PLN has
in past executed PPAs which provided for the base tariff from a tender to
escalate over time. The officials from EBTKE, however, advised us that the
tariff from the tender will not be escalated and therefore in submitting a bid
tariff bidders must also assume that the bid tariff includes any escalation
required for a 20-year period. If later the tender documents are silent on this,
developers should clarify this with the tender committee during the tender
explanation session which will be conducted after announcement of the tender
documents.
Other Requirements
Apart from the two important developments introduced by Reg. 17/2013 as
elaborated above, Reg. 17/2013 also imposes additional requirements for
solar power project developers which seems to be intended to secure real
commitment from developers to developing the projects.
EBTKE will submit the winning bidder determination to the MEMR for the
MEMR to issue the assignment to PLN for purchasing the power ("MEMR
Assignment Letter") only after the winning bidder deposit the above amount.
a) Reg. 17/2013 requires the PPA to be signed within 60 days after the date
of MEMR Assignment Letter. There is no express legal consequence
under Reg. 17/2013 if this 60-day deadline is not achieved.
b) The financial close must be achieved within three months after signing
the PPA and the developer must start construction activities at the latest
three months after the financial close. The MEMR Assignment Letter and
4 Introduction of Solar Power Feed-In-Tariff and New Solar Power Purchase Procedures In Indonesia July 2013
Finance & Projects
www.hhp.co.id the PPA will terminate if the developer fails to achieve any of the above
milestones before the deadline and fails to remedy it after obtaining three
warning letters from EBTKE.
For further information please
contact c) The commercial operation date must occur at least 18 months after
signing the PPA. An extension of up to 12 months is allowed but a
Luke Devine
penalty in the form of progressive tariff reduction up to 8% of the tariff will
Foreign Legal Consultant
+62 21 2960 8600 be imposed.
luke.devine@bakernet.com
Closing
Kirana D Sastrawijaya
Senior Associate
+62 21 2960 8541 As elaborated above, the meaning of some provisions in Reg. 17/2013 is not
kirana.d.sastrawijaya@bakernet.com very clear from the express wording of the clauses. Therefore their
implementation will much depend on the policy of EBTKE. Whether EBTKE
Fanny Kurniawan
will in fact implement the policy consistently remains to be seen.
Senior Associate
+62 21 2960 8527
fanny.kurniawan@bakernet.com The issuance of a feed-in-tariff regulation for solar power projects however
does show the seriousness of the Government in realizing untapped solar
Mesianti Tobing power potential in Indonesia by involving the private sector. The Government
Associate
has set very aggressive renewable energy targets through to 2025 and if this
+62 21 2960 8551
mesianti.tobing@bakernet.com regulation is intended as part of the way to seeing those targets achieved, this
regulation must be further followed up with at least immediate: (i)
determination of capacity quota; (ii) realization of the tenders for capacity
Hadiputranto, Hadinoto & Partners
quota; and (iii) publication of a bankable standard PPA.
The Indonesia Stock Exchange
st
Building, Tower II, 21 Floor Further, if a bankable standard PPA can be published before commencement
Sudirman Central Business District of the tender, developers will have a greater understanding of what their
Jl. Jenderal Sudirman Kav. 52-53 exposure will be under the PPA if they are successful in the tender and
Jakarta 12190 therefore it will assist developers when they must set their acceptable bid
Indonesia
tariff. Without having any visibility on what exposures they would be taking on
Tel: +62 21 2960 8888 vis--vis PLN under the PPAs that would be negotiated and signed with PLN
Fax: +62 21 2960 8999 post-bid, developers would have difficulties to set an acceptable bid tariff.
2013 Hadiputranto, Hadinoto & Partners. All rights reserved. Hadiputranto, Hadinoto & Partners is a member of Baker & McKenzie International, a Swiss Verein with member law firms around the world. In
accordance with the common terminology used in professional service organizations, reference to a partner means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an office
means an office of any such law firm.
This may qualify as Attorney Advertising requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.
5 Introduction of Solar Power Feed-In-Tariff and New Solar Power Purchase Procedures In Indonesia July 2013