Investment Opportunities of Electricity Sector in Indonesia (35GW Program)

35GW Electricity Program

Indonesia in 2015, with a total population estimated to have reached 257.9 million, the number of customers reached PLN 60.3 million or electrification ratio of 84%. Electricity  needs currently has reached 219.1 TWH.

By 2024 the population of Indonesia is estimated to reach 284.8 million by the number of electricity customers reached 78.4 million people, when the economic growth is estimated at 6.1 to 7.1% by 2024, the additional national electricity capacity reached 70 400 MW, assuming growth demand for electricity by 8.7% per year, the electrification ratio reached 99.4% of the national electricity demand will reach 464.2 TWH.

In order to achieve the construction of 35 thousand GW over the next five years, through RUPTL 2015-2024 PLN has set electricity infrastructure projects. During the years 2015-2019 will build 42 GW of which 7 GW power plant is part of the Fast Track Program II and an additional 35 GW is a new government program.

Of this amount PLN will build 17.4 GW, along 50 thousand kms of transmission and substations at 743 locations with the needs of capital expenditure amounting to Rp545 trillion. While the rest will be offered to the private sector to build power plants and transmission of 24.9 GW along 360 kms to the needs of capital expenditure of Rp 435 trillion. Electrification projects have still to be added to electricity projects outside the plan PLN.

The high interest is also visible from the license Principles for the electricity sector issued BKPM. During the period of 2010-2014, there were 114 foreign investment projects in the electricity sector with an investment of US $ 22,592.50 million. However, during the period 2011-2014 there were only as many as three foreign investment projects realization with an investment of US $ 215 million.

Investment Scheme of Electricity Sector in Indonesia

I. Independent Power Producers (IPP)

Purchasing Power and Standard Price of Power Purchase by PT PLN (Persero) through Direct Selection and Direct Appointment, set in ESDM No.3/2015. The regulation is structured to increase the capacity of the national electric power development, in particular to encourage the construction of power plants through mechanisms Independent Power Producers (IPP).

1. Direct Appointment procedure: The process of appointment directly with due diligence on the technical and financial capability to do by the procurement agent appointed by PT PLN Persero and until the signing of a power purchase agreement, not later than 30 (thirty) days.
2. Direct Selection Procedure: The selection process immediately preceded by a due diligence on the technical and financial capability to do by the procurement agent appointed by PT PLN Persero and until the signing of a power purchase agreement, not later than 45 (forty five) days ,
3. Tender/Open Auction: The auction is open IPP implemented if the condition is not eligible for direct appointment or election, directly or PLN wants Auction Open to all types of power plants. The winner is set at the lowest possible rate filings. According to the regulations IPP, open auction process with a capacity of >/= 15 MW of tender announcement until the signing of a contract takes 321 days if no re-tendering.

II. Public Private Partnership (PPP)

Public Private Partnership is a partnership scheme between the government and business entities in the construction of infrastructure projects. Cooperation is the provision of infrastructure projects undertaken through cooperation agreements or licensing the exploitation between the Indonesian government and private enterprises. In the implementation of cooperation projects, the Government of Indonesia to act as the Responsible Partnership Project.

III. Pure private

Electrical workforce by private financing is based on Presidential Decree No. 37/1992 on Electricity Supply Business by private, ie all electricity supply business held by private enterprises and cooperatives as the Electricity Business Permit for Public Interest. The role of the private sector contribution capacity will increase from approximately 15% to 32% by 2019 and 41% in 2024.

Electricity Supply Business License (ISBL/IUPTL)

Electricity Supply Business is supplying electric power includes the generation, transmission, distribution, and sale of electricity to consumers. Electricity Supply Business License (ISBL/IUPTL) is a license to conduct electricity supply business for the benefit of the public.

In practice, IUPTL made in two stages, namely: Provisional IUPTL and Fixed IUPTL. Publishing IUPTL stipulated in Minister of Energy and Mineral Resources No.35/2013 on the Licensing of Electricity Enterprises.

IUPTL services (temporary or permanent) to PMA, currently performed in PTSP BKPM, in accordance with the Regulation of the Minister No.35/2014 dated December 19, 2014.

Incentives of Tax Relief Facilities & Support/Guarantee Government of Taxation

1. Duty Exemption Facility. (Regulation of Finance Ministry (PMK) Nomor66/PMK.010/2015 on the exemption from import duty on capital goods in the Context of Development or the Power Generation Industry Development for Public Interest.
2. Facilities VAT. (Government Regulation (PP) No.31/2007 regarding Fourth Amendment of Regulation No.12/2001 on Import and/or Delivery of Certain Taxable Goods Characteristically Strategic exempted from Imposition of VAT). 
   
3. Tax Holiday (with Discrestion of Minister) (PMK Number 159/PMK.010/2015 on Issuance of Corporate Tax Reduction Facility) Tax Allowance (Regulation No.18/2015 About the Income Tax Facilities for Investment in Certain Business Sectors and/or in Certain Regions)

Government Support/Warranty 

Facilities Public Private Partnership (PPP)

• Land Fund (Presidential Decree No.56/2011 regarding the Second Amendment to Presidential Regulation No.67/2005 concerning Government Cooperation with Business Entities in Infrastructure Provision)
• Viability Gap Fund (PMK No.223/PMK.011/2012 about Giving Up Some Support Feasibility Project Construction Costs In Government Cooperation with Business Entities in Infrastructure Provision)
• Guarantee Fund (PII) (Presidential Decree No.78/2010 concerning Guarantee Infrastructure Project Government Cooperation with Business Entities Conducted through Infrastructure Guarantee Enterprises)
• Infrastructure Fund by PT Sarana Multi Infrastructure dan PT Indonesia Infrastructure Finance (PT SMI & PT IIFF), which will offer sources of funding for project financing Cooperation Type. (*)