INDONESIA Law and Practice Contributed by: Emir Nurmansyah, Serafina (Fina) Muryanti and Adya Sepasthika, ABNR Counsellors at Law
The power industry is mainly governed by Law No 30 of 2009 on Electricity (the “Electricity Law”), as last amended by Law No 6 of 2023 on the Stipulation of Government Regulation in lieu of Law No 2 of 2022 on Job Creation (becom- ing Law 6/2023). The Electricity Law does not regulate power storage. However, Government Regulation No 25 of 2021 on the Implementation of the Energy and Mineral Resources Sector sets out that battery energy storage system-related activities are classified under electricity-sup- porting services – namely consultancy services, installation, operation and maintenance ser- vices, and training services. Further, Presiden- tial Regulation 112 of 2022 on the Acceleration of Renewable Energy Development for Power Supply (PR 112/2022) sets out the price of bat- tery facilities and other electrical energy storage facilities for solar and wind power plants of all capacities having such facilities, where the price shall be determined based on the benchmark price of 60% of the purchase price of electricity. 1.2 Principal State-Owned or Investor- Owned Entities The principal state-owned enterprise in the power industry is PLN, which owns and operates generation, transmission and distribution facili- ties in Indonesia. PLN acts as the main offtaker of power and electricity generated by investor- owned companies that own and operate gen- eration facilities. PLN also has a mandate from the government to purchase electricity/power generated from geothermal and waste-to-energy power plants. There are also other state-owned enterprises that participate in the power indus- try, such as Pertamina. However, their role and position in the market are the same as those of investor-owned companies. Major investor- owned companies in the power industry include the following:
• local and domestic companies that own and operate power generation facilities, such as Adaro, Indika and Medco, in addition to well- known foreign investors that own and oper- ate power generation facilities in Indonesia including Sumitomo, J-Power and KOMIPO, to name a few; and • major local investor-owned companies that sell electricity to end-user consumers, such as PT Cikarang Listrindo and PT Bekasi Power, which supply electricity to industrial estates. 1.3 Foreign Investment Review Process Save for power generation of less than 1 MW (which is closed for foreign investment), there is no foreign investment restriction applicable to the power industry, which is open for 100% foreign investment. Foreign investment in the power industry is generally subject to protection, as set out in Law No 25 of 2007 on Investment as amended by Law 6/2023 (the “Investment Law”). The Investment Law provides the right to the investor to repatriate (in foreign currencies) capital, profits, dividends, other income, royal- ties and proceeds of the sale or liquidation of the investment, among other things. With respect to seizure, confiscation and expro- priation, the Investment Law does not specifi- cally use the foregoing terms; instead, it refers to nationalisation or taking over the ownership right of the investor. The Investment Law provides that the government shall not implement nationalisa- tion or take over investors’ rights unless the pro- cess is based on law, and the government must provide compensation based on market value. The market price should be determined by an independent valuer appointed by the parties and based on a method that is used internationally.
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