Indonesia IPP first sets state guarantee precedent

Author: Ashley Lee | Published: 6 Feb 2014
  • The Banten independent power producer is the first Indonesian power deal that did not require government guarantees for the obligations of state utility PLN under the power purchase agreement;
  • This is a step forward for Indonesian power deals, which had relied on direct government guarantees or a business viability guarantee letter (BVGL) from the government;
  • The deal could put pressure on other lenders to reevaluate PLN credit risk.

The Banten independent power producer (IPP) financing marked the first Indonesian power deal that did not require government support for the obligations of state utility PLN under the power purchase agreement (PPA).

While many power project financings have closed in Indonesia, all have required government support for PLN’s off-take. This could mean anything from a direct government guarantee to a business viability guarantee letter (BVGL), first introduced with the Wampu Hydro Electric Power Project.

The closing of Banten is not expected...