ABSTRACT
Indonesia has long had the potential for a significant flow of project finance deals across all sectors. Historically, independent power producers (IPPs) have been the most active sector for project finance. The electricity industry is regulated by the Ministry of Energy and Mineral Resources (MEMR). Selling electricity at below cost constitutes providing a function of public benefit and, if the government requires a State Owned Enterprise (SOE) such as Perusahaan Listrik Negara (PLN) to perform this Public Service Obligation (PSO). In Indonesia, sponsors have been expected to negotiate a deal with the owner of the resource, usually the state-owned oil and gas company Pertamina, before negotiating a tariff with PLN. This is because Geothermal Law addresses the production of steam whereas generation of electricity therefrom is governed by the 2009 Electricity Law. All PLN activities benefit from Ministry of Finance (MOF) support via the PSO mechanism.
