Indonesia: IPP sponsor approval

Author: | Published: 30 Oct 2017
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Ali Budiardjo Nugroho Reksodiputro


Graha Niaga, 24th Floor Jl. Jend. Sudirman Kav. 58 Jakarta 12190


+62 21 250 5125/5136


+62 21 250 5001/5121 Visit Website

In August 2017, the Minister of Energy and Mineral Resources introduced a new regulation which revoked its previous controversial (and short-lived) regulation which had required that the ministry's approval be obtained by sponsors of independent power producers (IPP) before executing any share transfer or change of the IPP's board of directors or commissioners.

Under the new regulation, sponsors of geothermal IPPs are still required to obtain approval from the ministry for any public share transfer (that is, through a stock exchange) occurring after the exploration phase. A notification is only required to be provided to the ministry for private share transfers occurring after the exploration phase.

Before the commercial operation date (COD) is reached, sponsors of non-geothermal IPPs are required only to notify the ministry of any qualified share transfers between affiliates. Transfers of shares to non-affiliates before the COD is reached are still prohibited (and no explicit exemptions are provided to this blanket prohibition).

Under the new regulation, IPP sponsors (whether geothermal or non-geothermal IPP sponsors) are no longer required to obtain the ministry's approval before amending the structure of their boards of directors or commissioners. Instead, they are required simply to notify the ministry.

Even with the relaxation of the rules as described above, the new regulation would still impede lenders in terms of the enforcement of securities (especially share pledges) that occurred before the COD. As previously mentioned, the new regulation lacks any exemptions to the general prohibition on share transfers to non-affiliates, which could lead to difficulties during the enforcement process.

The ministry is continuing to consider whether the new regulation should be further amended to alleviate, among other things, the potential commercial difficulties for lenders as mentioned above.

  Oene Marseille and Emir Nurmansyah
Ali Budiardjo Nugroho Reksodiputro




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