The Energy Regulation and Markets Review - Stikeman Elliott

iv
Indonesia
Transfers of control and assignments
The 2009 Electricity Law and its implementing regulations do not specify the transfer of
control and assignments in the electricity industry. In general transfer of control will be
provided in the power purchase agreements, and usually with the approval of PT PLN.
Maximum foreign ownership as provided in the Negative List must also be observed in
the transfers of control, as well as the requirement under the Company Law.
In any foreign direct investment companies, transfer of control and assignments
will require processing through the BKPM and the Ministry of Law and Human Rights
(‘MLHR’). Recommendations by and reporting to the MEMR is also required for
mining companies wishing to transfer control.
An application for transfer of control is first submitted to the BKPM, accompanied
by a recommendation from the MEMR (for mining sector companies and downstream
oil and gas companies). After registration is approved the company submits the transfer
agreements and corporate documentation to the MLHR for the change of control. The
average time required to complete a transfer is between one and three months, depending
on the industry segment.
III
TRANSMISSION/TRANSPORTATION and DISTRIBUTION
SERVICES
i Vertical integration and unbundling
The 1985 Electricity Law provided for a centralised system with state-owned electricity
company PT PLN holding exclusive power over the transmission, distribution and sale
of electricity. Private companies were allowed to generate electricity only, to be sold to
PT PLN.
After the Asian Financial crisis of the late 1990s, the government tried to liberalise
the electricity industry through the enactment of the 2002 Electricity Law, allowing
independent private producers to sell directly to consumers within a competitive area.
In parallel with the attempt to liberalise the electricity sector, the government also began
liberalisation and demonopolisation of the oil and gas sector with the promulgation of
the 2001 Oil and Gas Law. Both the 2001 Oil and Gas Law and the 2002 Electricity Law
were reviewed by the Constitutional Court.
When the 2002 Electricity Law was declared unconstitutional, the system reverted
back to the 1985 Electricity Law, pending the issuance of a new law on electricity.
Meanwhile, the 2001 Oil and Gas Law eventually passed the Constitutional Court review
except for a few provisions. Through the 2001 Oil and Gas Law, reform of the oil and gas
sector took place carving out a managerial role in oil and gas production and operation
from the state-owned oil and gas company, Pertamina, for a new agency, BPMigas; it
also demonopolised downstream oil and gas from Pertamina, allowing distribution,
transportation and transmission to private entities to be regulated by BPH Migas.
Along with the deregulation of the oil and gas sector, the government’s policy
in trying to adopt a mixed fuel policy for power generation was hampered by the
underdeveloped infrastructure for domestic natural gas distribution. To balance the
rise of the oil prices and the lack of infrastructure for domestic gas transportation,
and to support the government’s fast-track programme in the supply of electricity, the
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