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Indonesia: Government loan guarantees

Oene MarseilleEmir Nurmansyah

The Finance Ministry of Indonesia has issued a regulation outlining the procedures for granting government loan guarantees for the development of electricity infrastructure in Indonesia. The regulation also outlines the steps for enforcing the guarantees.

The relevant guarantee will cover all of state electricity company PLN's financial obligations pursuant to loan agreements entered into with creditors on the qualified electricity infrastructure projects. Projects listed by PLN under the so-called PIK scheme (priority projects pursuant to a presidential regulation issued earlier this year) qualify to receive a loan guarantee under the new regulation.

PLN will initiate the guarantee application process by sending an application package to the relevant directorate general of the ministry. The directorate general will have 25 days to evaluate and issue its approval. However, there are several bureaucratic paths that need to be followed.

The guarantee will take the form of a letter signed by the finance minister and addressed to the creditor. The guarantee will be valid for the duration of PLN's obligation to the creditors under the relevant agreement.

If it becomes necessary for PLN's creditors to enforce the guarantee, PLN would again need to initiate the process (pursuant to the creditors' claim of default), by sending what is known as a notice or acknowledgement of its inability to fulfill its financial obligations to the creditors. The creditor will need to follow up by submitting a formal written claim to the Finance Ministry pursuant to the relevant guarantee.

Disbursement by the government can be made if:

  • the relevant agencies have completed their verification process; and
  • PLN has submitted a no-objection statement on the particulars of the claim.

Oene Marseille and Emir Nurmansyah

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