Indonesia requires more approvals in power firms' shareholding changes

Indonesia requires more approvals in power firms' shareholding changes

On 14 July, Baker McKenzie said that the Minister of Energy and Mineral
Resources issued Regulation No. 42 of 2017 on Supervision on Business
Activities in Energy and Mineral Resources Sector (Reg. 42), which seeks to
regulate two corporate actions of IPP companies (namely holders of
electricity generation licences, known by their Indonesian acronym IUPTL)
and IPB holders, namely: transfers of shares in IPP companies and IPB
holders; and changes in board members in those companies.

Any transfer of shares in an IUPTL holder (ie, a license for the supply of
electricity for public interest, which is the license that an IPP requires
to carry on
business) or an IPB holder requires approval by the Minister of Energy and
Mineral Resources.

Here's more from Baker McKenzie:

In the case of an IUPTL holder, a transfer can only be carried out if the
power plant has reached commercial operations and if the transfer is being
made to an entity that is more than 90% owned by the transferring sponsor.

Reg. 42 also states that for the affiliate transfer option, the affiliate
must be a direct 90% owned subsidiary of the transferring sponsor. The
regulation provides an extensive list of documents that must be submitted
with the request for approval, including an explanation of the reason for
the share transfer, approval by the buyer of power (ie, PLN, in a typical
IPP project) as well as past tax returns, and financial statements of the
transferee.

The Minister is required to issue approval or rejection within 14 business
days (for power projects) or 10 business days (for geothermal projects).
There are no "deemed approval" mechanisms if no response is received within
the prescribed period. In practice, therefore, the 14-business-day period
may be more of a guideline than a rule.

For IPB holders, Reg. 42 only states that the transfer of shares must be
done in accordance with prevailing laws and regulations (namely the
relatively unclear provision of the 2014 Geothermal Law) with prior approval
from the Minister of Energy and Mineral Resources.

For the purpose of obtaining the approval, Reg. 42 requires the IPB holder
to submit similar documents to those required for a change of shareholder in
an IUPTL holder, with the additional of evidence of payment of the latest
deadrents, production fees and production bonus (if the company has already
achieved commercial operation).

Accordingly, the fact that Reg. 42 does provide a mechanism for Minister
approval, and this list of requirements that needs to be fulfilled does
relate to documents relevant to a private (ie, non-stock market) transfer,
this does support the view that the correct interpretation of the 2014
Geothermal Law is to allow for private (ie, non-stock market) transfers.

Curiously, although the 2014 Geothermal Law clearly contemplates a transfer
of shares through the stock market, Reg. 42 does not contain a mechanism for
dealing with approvals of share transfers in a publicly listed IPB holder
(ie, it would be unworkable if the Minister were required to approve a
change in daily trading of shares in a listed company that held an IPB).

It would appear that for geothermal companies that hold both an IPB and an
IUPTL wanting to change shareholders, there is a need to make two
applications for approval.

Change of board of directors / commissioners Holders of IUPTLs must first
obtain the approval of the Minister of Energy and Mineral Resources before
making any changes to their board of directors or commissioners.

As with the share transfer approval process, there is a requirement for
submission of a number of administrative documents, including the
recommendation of the buyer of power (ie, PLN for a typical IPP) and the
past income tax returns of the incoming Director/Commissioner. Again, the
Minister must notify its approval or rejection within 14 business days.

For IPB holders, similar approval is required, except that the approval
process is slightly shorter, ie, 10 business days; there is no requirement
on the recommendation from the buyer of power; the company must provide
specific details on the reason for such change in board members.

--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---

Link to Original Article:
http://asian-power.com/regulation/in-focus/indonesia-requires-more-approvals
-in-power-firms-shareholding-changes

--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---

John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com