Commentary

Overview On 16 February 2011, the Minister of Energy and Mineral Resources (the MEMR) issued a new regulation on Electricity Pricing for Indonesian Geothermal Projects (MEMR Reg 2/2011). This new regulation is important because it obliges PT Perusahaan Listrik Negara (Persero) (PLN) to buy electricity from independent geothermal power producers and sets price guidelines for the purchase of the power by PLN under the applicable power purchase agreements (PPAs). This regulation will be used as a reference for all geothermal power projects in Indonesia. The procedure for establishing tariffs for Indonesian geothermal power projects has lacked clarity for some years. We expect that MEMR Reg 2/2011 will provide greater certainty to the process of settling tariffs for such projects, thereby expediting the negotiation of geothermal PPAs and helping to provide much-needed impetus to the development of this sector.

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