Risk Mitigation Strategies For The Implementation Of Step-In Rights In Power Plant Project Financing Agreements In Indonesia

Abstract

Infrastructure project financing in Indonesia often utilizes long-term loan schemes between lenders and project companies. One important clause in the financing agreement is the step-in rights, which authorizes the creditor to take over the management of the project in the event of default by the project company. However, the implementation of step-in rights faces several challenges, mainly related to the unclear arrangements in the legislation, the ability of creditors to take over operations, and coordination between related parties.

Therefore, this study aims to analyze a comprehensive risk mitigation strategy in the implementation of step-in rights in development project financing contracts in Indonesia. The methodology used is a literature study and analysis of related regulations. The results show the need for clear arrangements regarding step-in rights, analysis of the creditor's ability to take over operations, planned transition mechanisms, and government involvement in supervising and facilitating the implementation of these rights. Risk mitigation strategy recommendations are developed based on these findings to ensure the effectiveness of step-in rights implementation in financing development projects in Indonesia.