In early 2025, the Indonesian Government introduced Minister of Finance Regulation No. 5/2025 (“MoF Reg. 5/2025”), marking a significant step forward in strengthening investor confidence in the country’s renewable energy sector. This regulation provides much-needed clarity on the scope of government guarantees and risk-sharing mechanisms, long-awaited by both domestic and foreign investors.

This new framework expands its eligibility beyond just national strategic projects. It offers faster turnaround for initial assessments, with a five-working-day review timeline, and extends coverage to renewable, geothermal, and coal-transition projects. The regulation also addresses key risks such as defaults under Power Purchase Agreements (“PPAs”) with PLN and financial obligations related to loans or bond issuances.

The application process is now more structured and transparent. Investors and PLN would collaborate to draft a PPA that aligns with the national energy goals. PLN would then submit a guarantee application to the Ministry of Finance and be evaluated in detail by the Infrastructure Guarantee Business Entity (“BUPI”). Upon BUPI’s recommendation, the Ministry may approve the guarantee request and authorize the issuance of a Ministerial Decree.

While the regulation represents real progress, some challenges remain. The regulation does not stipulate a deadline for the Indonesia Infrastructure Guarantee Fund (“IIGF”) or other guarantee institutions to assess and disburse claims, which may introduce uncertainty and potentially limit investors’ financing options.

Nonetheless, MoF Reg. 5/2025 signals Indonesia’s strong commitment to clean energy development and provides a more compelling environment for long-term investment. It would be in the best interest of potential investors to fully leverage these opportunities. Establishing strong communication and cooperation channels with Indonesian authorities is highly recommended to navigate the regulatory process effectively and ensure legal compliance.

If you, a prospective client, have further inquiries about the topic discussed above, Schinder Law Firm is one of the leading corporate law firms in Indonesia, with extensive experience handling similar matters. Our team of professional corporate and civil lawyers makes us one of the top consulting firms in Indonesia. Feel free to contact us at info@schinderlawfirm.com for further consultation.

Author:
Dewi Susanti