The Indonesian government just issued new guidelines for Power Purchase Agreements (PPAs) in the renewable energy sector under the Ministry of Energy and Mineral Resources Regulation No. 5 of 2025 on Guidelines for Power Purchase Agreements for Renewable Energy Power Plants (“MEMR Reg. 5/2025”). This new regulation replaces MEMR Regulation No. 10 of 2017 (as amended) (“MEMR Reg. 10/2017”) in relation to renewable energy PPAs. Notably, MEMR 10/2017 remains applicable only for PPAs involving non-renewable energy.
MEMR Reg. 5/2025 adds new minimum provisions of PPA: (a) electrical installation certification; (b) use of domestic products; (c) environmental attributes, such as carbon credits and renewable energy certificates; (d) refinancing; and (e) language provision.
MEMR Reg. 5/2025 also introduces several new regulatory requirements aimed at providing more ‘bankable’ PPAs in the renewable energy sector, as discussed below:
- PPA Scheme: Instead of the restrictive Build, Own, Operate, and Transfer (BOOT) scheme only, MEMR Reg 5/2025 now allows parties to adopt Build, Own, and Operate (BOO) as their PPA scheme, and other schemes that are contractually agreed.
- PPA Term: The PPA term is now extendable for more than 30 years without considering the initial investment value, compared to the restrictive 30-years period from COD under MEMR Reg. 10/2017.
- Deemed Dispatch: PLN is now required to compensate the IPP for electricity that could not be delivered due to a Deemed Dispatch event such as curtailment imposed by PLN, based on the contractually agreed grace period set out in the PPA
- Transfer of Shares Prior to COD: Compared to the more restrictive share transfer requirements under MEMR Reg. 10/2017, MEMR Reg. 5/2025 introduces greater flexibility by allowing share transfers prior to COD, provided that the transfer is either to an affiliate or made in connection with the exercise of lender’s step-in rights, and does not compromise the sponsor’s required qualifications.
- Forex Risk: MEMR Reg. 5/2025 expressly mandates PLN to assume the foreign exchange risk is to be borne by PLN.
Other differences between MEMR Reg. 10/2017 and MEMR Reg. 5/2025 are as follows:
| No. | Matters | MEMR Reg. 10/2017. | MEMR Reg. 5/2025. |
| 1. | Project Performance Bond | No specific percentage or threshold for the performance bond. | The new regulation stipulates that the bond must be no more than 10% of the total project cost and is divided into 3 stages by taking into account the maximum amount of liquidated damage. |
| 2. | Refinancing | N/A | To support the implementation of the project, the IPP is permitted to carry out refinancing with the lenders. |
| 3. | Language | N/A | MEMR Reg. 5/2025 requires the PPA to be made in Indonesian, with a foreign language version allowed if needed. The parties are allowed to contractually agree on the prevailing language |
While the introduction of MEMR Reg. 5/2025 provides greater clarity and reflects the government’s commitment to enhancing the renewable energy market in Indonesia, there remain several areas where further clarification would be beneficial. These include, among others, more detailed guidance on the implementation of lenders’ step-in rights and the specific criteria that PLN will apply in assessing sponsor qualifications.
Our team will continue to closely monitor the developments and keep you updated on any progress.
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