The Banten power plant is Indonesia's first power project
not to require government support for the obligations of state
utility PLN under the power purchase agreement (PPA).
While many power financings have closed in the country, all
have required government support for PLN's offtake. This could
mean anything from a direct government guarantee to a business
viability guarantee letter (BVGL), which first introduced with
the Wampu Hydro Electric Power Project.
The closing of Banten, an independent power producer (IPP),
is not expected to spark a flood of deals to close without
government guarantees for PLN's obligations. However, this
might encourage others to consider financing power projects
without any support.
"The sponsor, borrower and financiers are taking PLN credit
risk when it comes to payments under the PPA," said Sanja
Udovicic, London-based partner at Shearman & Sterling.