GHP advises Indonesian power company PLN in major restructuring

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GHP advises Indonesian power company PLN
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GHP Law Firm assists Indonesian state-owned electricity company, Perusahaan Listrik Negara (PLN), to conclude a major restructuring, involving the transfer of 21,352MW of power generation assets of around IDR330 trillion (USD21 billion) and forming four sub-holding companies.

The establishment of the sub-holdings is aimed at transforming PLN’s business model and accelerate the transition to renewable energy, as well as create a more agile and efficient structure.

GHP Law Firm assisted with the reorganisation, which took effect on 1 January 2023. Senior partner Mohamad Kadri led the Jakarta-based team, and supported by partners Yohanes Masengi, Dirgantara Adi and Yohanes Brilianto Hadi. The firm’s associates Dhaka Merah, Lance Lentini, Viva Merdeka, Rimba Suryodipuro, Raushan Aljufri, Daffa Irsyaad and Benedict Giankana also assisted.

“The main challenge in this restructuring is the number of transferred assets. More than 4,000 related contracts were transferred and more than 3,700 of PLN’s personnel were moved to the related sub-holdings,” Kadri told Asia Business Law Journal.

“The large scale of this restructuring could raise concerns and challenges in terms of the financial and operational aspects of the transfer and requires close monitoring and management.

“As the electricity business is a heavily regulated industry, extensive discussions with relevant ministries (consisting of more than 10 ministries and institutions) were required to ensure that all legal and regulatory requirements were met,” said Kadri. “Extensive discussions and co-ordination with PLN’s lenders were also required to ensure that the restructuring does not conflict with PLN’s undertaking under financing documents.”

The first sub-holding converts assets of Pembangkitan Jawa Bali, which controls power generation and distribution across Java and Bali islands with an 18GW capacity, into PLN Nusantara Power. The second sub-holding consolidates assets owned by Indonesia Power with assets in the Sumatra and Kalimantan islands, with a total power capacity of 21GW, and converts them into PLN Indonesia Power.

Masengi added that the restructuring will allow PLN Nusantara Power and PLN Indonesia Power to optimise their resources and capabilities, and pursue opportunities in the power generation industry, particularly in developing and operating renewable energy projects.

“This will also positively impact the energy sector and help fulfil the energy demand in Indonesia and support PLN’s energy transition initiatives,” said Masengi. “The Indonesian government has set ambitious targets for increasing the share of renewable energy in the country’s overall energy mix.”

“Indonesia has significant potential for growth in its energy sector, particularly in renewable energy sources such as geothermal, solar, and hydroelectric power,” he said. “However, the country also has a large domestic market for fossil fuels and continues to be a significant producer of coal and oil.”

Considering the complex and dynamic regulatory environment, Masengi said that it is essential for companies to comprehensively understand the relevant laws, regulations, and policies, as well as the political and economic landscape.

“Companies should also be prepared for potential challenges related to infrastructure and financing,” he added.

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