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On April 23, 2025, A&O Shearman was invited as one of two legal panelists at a focus group discussion on "Implementation of Waste-to-Energy to Overcome the Waste Management Emergency," held by the Coordinating Ministry of Infrastructure and Maritime.
We observed that dual revenue streams between regional governments and PT PLN (Persero) (PLN)—and the lack of synchronization between them—have hindered the development of internationally bankable waste-to-energy (WtE) projects in Indonesia. In response to a government question asking for a single improvement that would make projects more attractive, we recommended a single revenue stream from a creditworthy counterparty, namely PLN (with adequate fiscal support).
On October 10, 2025, President Prabowo Subianto finally issued Presidential Regulation No. 109 of 2025 on the Urban Waste Management through Environmentally Friendly Technology-Based Conversion of Waste into Renewable Energy (PR 109), which, among other measures, streamlines revenue for WtE projects.
Key aspects of the new regulation
Revenue stream
- There will be only a single revenue stream from PLN; no more tipping fee.
- Fixed Feed-in Tariff (FiT) of USD 0.20/kWh for 30 years with no escalation, excluding "Special Facilities" costs. PLN is entitled to government compensation if the new FiT increases PLN's average generation cost and/or for the development of Special Facilities.
Procurement of private investors
- Private participation is now procured centrally by BPI Danantara through WtE tenders; regional governments no longer run tenders.
- Direct appointment is allowed under specified conditions.
- If tender interest is insufficient, the government may procure direct cooperation between the relevant regional government and interested private investor(s).
Roles and obligations
- BPI Danantara:
(i) Procurement entity (through its investment holding, operational holding, state-owned enterprise (SOE) or SOE subsidiary) for WtE projects approved by the Minister of Environment
(ii) Potential equity investor where acceptable from commercial, financial, and risk perspectives
- Regional government:
(i) Initiates WtE projects
(ii) Enters into the cooperation agreement with the project company
(iii) Ensures at least 1,000 tons/day waste supply during operations (regulation is silent on "on-spec" composition)
(iv) Allocates regional budget for collection and transport to the WtE plant (no specific mention of sorting or storage)
(v) Provides land on a no-cost lend-lease basis
(vi) Implements regional clean service retribution
(vii) Includes WtE development in regional plans and the waste management master plan
(viii) Includes in the cooperation agreement, among others, compensation for failure to deliver committed waste volume and an event-of-default regime
- PLN:
(i) Purchases electricity from WtE projects
(ii) FiT subject to review by the minister of energy and mineral resources
(iii) FiT applies to electricity after the scheduled commercial operating date (COD), with no clarity on tariff applicable to early COD (if such early COD is agreed)
(iv) Take-and-pay applies where the WtE company is in breach due to technical errors outside its control or there are waste-volume issues, with the regulation silent on take-or-pay in other circumstances (e.g., government action/inaction, change in law, PLN default)
(v) PPA is must-dispatched on a priority basis in accordance with annual contracted energy, with the regulation silent on delivery-or-pay.
Grandfathering
- Grandfathering applies to existing WtE projects that have any of the following: (i) a winning bidder stipulated by the regional government; (ii) a signed concession agreement with the regional government; and/or (iii) a PPA with PLN.
- Grandfathered projects may opt into PR 109 if such projects fail to: (i) process waste into electricity, (ii) reduce waste volume significantly; and/or (iii) reduce waste processing time significantly with environmentally friendly technology and upon final and binding termination of existing project arrangements. The regulation is silent on whether this will be direct appointments.
Our preliminary commentaries
PR 109's framework is commercially clarifying but leaves several bankability inflection points for sponsors and lenders:
- The shift to a single revenue stream from PLN simplifies cash flows but transfers waste-supply and composition risk squarely onto regional governments and project companies, particularly given the regulation's silence on "on spec" waste.
- A fixed, non-escalating 20 cents/kWh FiT over 30 years, while materially higher than legacy tariffs, creates inflation and O&M cost pass-through risk over the long term.
- PLN's entitlement to government compensation if its average generation cost or Special Facilities costs increase is a useful fiscal support, but the project-level certainty hinges on how that compensation interplays with PPA tariff sufficiency.
- Centralizing procurement through BPI Danantara is a notable pivot that could accelerate pipeline development and standardize risk allocation.
- BPI Danantara ability to act as an equity investor may also de-risk initial financings.
However, we note that key gaps remain, amongst others:
- Ambiguity around take-and-pay versus take-or-pay in events beyond project default or inadequate waste volume/off-spec waste composition
- Uncertainty on tariffing for early COD
- The lack of an explicit obligation for waste sorting or composition control
All of these will need to be addressed in the concession and PPA to achieve financeable structures.
Conclusion
In conclusion, the regulation provides a strong policy signal—priority dispatch up to annual contracted energy, centralized tendering, and clear delineation of stakeholder roles—but sponsors should expect intensive negotiation on waste volume guarantees, composition tolerances, make whole and curtailment regimes, and inflation protection given the non-escalating FiT.
Regional governments bear meaningful obligations, including land provision on a no cost lend lease basis, assured waste volumes of at least 1,000 tons/day, and implementation of clean service retribution, with default and compensation consequences for shortfalls.
Grandfathered projects gain an optional pathway to align with the new regime, but only upon final and binding termination of existing arrangements.
Overall, PR 109 is a step toward bankable standardization, yet prudent risk allocation will depend on detailed PPA and cooperation agreement drafting, with particular attention to waste specification, payment certainty, and long-term cost inflation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
