As many as 21 PPAs for new and renewable energy power plants planned to be signed this year

This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.

Kontan Online : Sebanyak 21 proyek pembangkit listrik EBT direncanakan tanda tangani PPA tahun ini

28 April 2019

By Ridwan Nanda Mulyana and Tendi

Kontan.co.id – Jakarta. The Government and PT Perusahaan Listrik Negara (PLN) continue to increase new and renewable energy (EBT) mix in electricity. Therefore, there will be at least 21 EBT power plant projects to have their power purchase agreement (PPA) signed in 2019.

Director of Aneka Energi of the Directorate General for New and Renewable Energy and Energy Conservation in the Energy and Mineral Resources Ministry, Harris, disclosed that out of the 21 planned projects, 9 projects are carried-forward projects from the year 2018, and 12 projects are new projects.

Harris explained carried-forward projects are projects whose power purchase agreement has been drafted before 2019, but has not been signed. Specifically for Mini-Hydro Power Plant (PLTM), continued Harris, a carried-forward project is a project which has secured Hydropower Operator Determination (PPTA).

Meanwhile, a new project is a project whose power purchase agreement is made in 2019. The PPA will be exercised once the developer is ready and has meets the requirements. “This is initial information. The PPA process depends on the readiness of the developer. So, the PPA progress will vary,” he revealed when contacted by Kontan.co.id, Sunday (28/4).

Harris pointed out that the total capacity of the 21 projects whose PPA will be signed this year reaches 795.12 MW. In detail, 300.33 MW comes from carried-forward projects and 494.79 MW from new projects.

Further, according to Regional Business Director for Eastern Java, Bali and Nusa Tenggara of PLN, Djoko Raharjo Abumanan, in terms of number, PLTM will still dominate EBT power plant projects whose PPA will be inked this year. “[The EBT projects are] still [dominated by] PLTM, in accordance with the development maturity and the nature’s [potential] in Indonesia,” he revealed.

Nevertheless, Djoko asserted that currently his company is still working on the procurement process. So, the number can still go up depending on the readiness of the developers and the evaluation results from the Central PLN and its units.

Djoko also said, in the current PPAs, his company will be more selective in gauging developers’ ability. “Still in the procurement process in Central PLN and its units, the number is still being updated. Inshallah (If God wills) there will be a lot [of projects], [but] it depends on the developers in the PPA. We will look into it with more cautious,” said Djoko.

Meanwhile, Executive Director of Institute for Essential and Service Reform (IESR) Fabby Tumiwa reminded that a large number of projects signing the PPA will not be significant if it is not coupled with project viability to proceed to the next stage.

Because to begin operation as an installed capacity, a project needs to initially achieve financial close and complete the construction stage.

Whereas to reach that stage, PPA projects need to be attractive and worthy of investment. Besides the quality of the projects, continued Fabby, project viability is determined by a number of factors such as risk sharing between PLN and developers and provisions in the PPA.

On top of that, Fabby also stressed out that regulation also plays a key role. According to him, provisions on tariffs in the Energy and Mineral Resources (ESDM) Minister Regulation Number 50 of 2017 and PPA provisions in ESDM Minister Regulation Number 10 of 2017 highly determine the projects’ financial viability that can attract investors.

Moreover, he went on, the build, own, operate, and transfer (BOOT) scheme in the ESDM Minister Regulation Number 50 of 2017 makes the projects less attractive to investments. “These two regulations affect the projects’ bankability. So it is necessary to have balanced risk allocation [in the regulation],” he said.

Moreover, reflecting from EBT projects in PPA in 2017, to date at least 15 EBT projects are at risk of contract termination because the financial close is yet to be reached. “So the PPA [drafting] is only a beginning. There is a FC (financial close) stage prior to construction. From the experience (PPA in the year 2017), out of 70 projects, not all projects can begin construction. If the PPA is bankable, the FC process can be faster,” expressed Fabby.

Similarly, Head of Hydropower Plant Developers Association (APPLTA) Riza Husni also highlighted regulation issues. For instance, according to him, it is better for small-scale power plants with a capacity of less than 10 MW to return to the direct assignment system, unless the location is highly attractive.

He also thought that that it would be better for the BOOT provisions to be removed. “So, the PPA format can be fairer. Small investors may be interested and they can easily obtain loan from banks,” Riza said.