Project Finance Loan Agreement Template for Indonesia

A Project Finance Loan Agreement is a complex financial instrument specifically designed for large-scale infrastructure and development projects in Indonesia. Unlike traditional corporate lending, this agreement structures financing on a limited or non-recourse basis, meaning lenders primarily rely on the project's future cash flows and assets for repayment rather than the borrower's general creditworthiness.

When do you need this document?

You need this agreement when financing major infrastructure projects such as power plants, toll roads, ports, or manufacturing facilities that require substantial capital investment. It's essential when establishing a special purpose vehicle to isolate project risks from sponsors' other business activities. The document is crucial for international financing transactions where foreign lenders participate alongside domestic banks, and when complex security arrangements over project assets are required. You'll also need this agreement when the project involves government concessions or permits that must be pledged as security, or when financing spans multiple phases including construction, commissioning, and operational periods.

Key legal considerations

The agreement must carefully structure security interests to comply with Indonesian secured transactions law, including fiduciary security under Law No. 42 of 1999 for movable assets and land mortgages under Law No. 4 of 1996 for real property. Currency provisions must address mandatory Rupiah requirements for domestic transactions while accommodating foreign currency borrowings where permitted. The document should include comprehensive conditions precedent covering project approvals, environmental permits, construction contracts, and insurance arrangements. Default provisions must balance lender protection with practical project realities, including step-in rights and cure periods. Guarantee structures require careful drafting to ensure enforceability under Indonesian corporate law, particularly regarding board approvals and corporate benefit requirements.

Legal requirements in Indonesia

Indonesian law imposes specific requirements on project finance transactions that must be reflected in the loan agreement. Under Banking Law No. 7 of 1992, credit facilities must comply with prudential banking regulations and lending limits. Investment Law No. 25 of 2007 governs foreign investment aspects, including negative investment lists and minimum capital requirements. Corporate borrowers must obtain proper board approvals under Company Law No. 40 of 2007, including shareholder approval for material transactions. Security creation requires compliance with specific registration and perfection procedures under Indonesian secured transactions laws. The agreement must address OJK regulations on banking activities, including reporting requirements and foreign exchange restrictions. For projects involving state-owned enterprises or government concessions, additional approvals and compliance measures may be required under applicable sectoral regulations.