Govt Improves PLN Regulation for Power Project

Jakarta - Finance Ministerial Regulation (PMK) 139/2011 on government guarantees for state electricity company PT PLN to build power project is considered as a big progress, a foreign legal consultant said. "PMK 139 already has a big improvement from PMK 77. In the last few months the government have been listening to banks and developers, on their concern about PMK 77 but still there's couple of issues to be coped with," Foreign Legal Consultant Luke Devine said here on Monday. Both regulations were about the government guarantees for PLN to build power project or its transmission by using renewable energy, coal and gas under a cooperation with the private sector. PMK 77 was issued in April 2011, and PMK 139 in September 13. The main distinction between the two regulations is the Ministry of Finance placed PLN in a position where it can fulfill its financial obligations in relation to default risks during part or whole of the operational period. "Under the previous regulation the Minister of Finance will guarantee the business viability of PLN in case of a shortfall, but only applies where PLN's funds are not sufficient and limited to PLN defaults caused by the omission of government," he said. But Luke noted that there is a couple of issues to be solved. "Buy-out payment due on a termination of the Purchase Power Agreement (PPA) and other incidental payments are not covered by PMK 139," Luke noted. Buy-out payment is a compensation that a participant who withdraws from an already active Cost Contribution Arrangements (CCA) may receive from the rest of the participants for an effective transfer of its interests in the results of past CCA activities. "About 90 percent has been accommodated in the regulation, the missing ten percent could be covered in a specific draft letter, or the Minister of Finance could consider revising the regulation again", he said. He emphasized that the investors wished the Minister of Finance not just makes PLN to fulfill its obligations but also really pay its obligations.