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Friday, 23 December 11
CONTENTIOUS ISSUES IN CONTRACT RENEGOTIATION - THE JAKARTA POST
 The government has been renegotiating mining contracts, especially those 30-40 years old, with almost all mining companies, including PT Freeport Indonesia, which has been operating since 1967. This is a major step the government is taking and of course will affect the climate of mining investment in the future. If not carefully planned and executed, renegotiation might severely harm the prospects of the national mining industry.
That is why it is important for the government to choose the most important points to be brought to the negotiating table and to ensure that the results are beneficial to both sides, i.e., the mining enterprises and the government.
The basis for renegotiation is Law No. 4 /2009 on mining, which has changed the mining-concession regime by introducing a new licensing system. The law replaces mining authorizations (Kuasa Pertambangan or KP) as well as contracts of work (CoWs) and contracts of coal mining work (CCoW or PKP2B). The government acknowledges all CoWs/CCoWs that have been awarded before the law was promulgated; however all CoWs/CCoWs still need to be renegotiated.
The fundamental difference between the concession and licensing regimes lies in a number of points. Most important is the difference in the legal nature. While concession is based on civil law and the source of law is the agreement itself, licensing is public and legislation is the source of law. The application of a “concession” is the agreement between the two parties, the mining enterprises and the government, while a “license” is based on permission from the government.
In terms of rights and obligations, a licensing regime puts the government in a more dominant position. Settlement of disputes is through international arbitration for concession agreements but is via a state administrative court for licensing regimes.
These differences, of course, will be perceived differently by different mining enterprises. Large-scale mining companies and international enterprises prefer arbitration as a legal option, because arbitration is considered to be more fair and free from political intervention. Given that perception, the new regime is seen to generate potentially larger political risks.
Moreover, the bilateral nature of the contract system is believed to provide more protection against future changes in the law than a unilateral licensing system.
For small or national mining companies, however, licensing regimes might be seen to be friendlier as they provide equal opportunities to both domestic and foreign investors in applying for licenses.
Renegotiation is needed to adjust the content of contracts, which have been running since before the Mining Law came into being. These contracts need to be adapted to be in accordance with the new law. Renegotiation began in the fourth quarter of 2009 for CoWs and early 2010 for CCoWs.
Philosophically, however, renegotiation aims at restoring the country’s sovereignty over its natural resources as well as providing a better use of the resources for the people. This is reflected in a number of articles to adjust CoWs and CCoWs, to increase the added value for minerals and coal by imposing an obligation on contractors to establish downstream industrial facilities, to enhance state revenue through rate adjustments for royalties and production fees and to prioritize the use of local and national services.
Based on the notion of providing a better use of resources, a number of strategic issues are being brought to the negotiation table, such as the limitation of mining areas, contract extension, state revenue, divestment obligations for foreign investors that hold full-ownership in local mining firms, the obligation of processing and refining in the country’s smelters, as well as the obligations of the use of domestic goods and services.
As expected, the most prominent issue during the renegotiation is about the augmented state revenue — the first contentious issue. State revenue refers to mining taxes and profit-sharing schemes. The government is tightening tax regulations to enhance national revenue. This is the reason why the tax authority is involved in the renegotiation and assesses whether or not an enterprise is losing money.
Renegotiation on profit-sharing might not be necessary with those enterprises that are losing money. But the key point here is transparency — the enterprises must reveal their income — as the fundamental purpose of the renegotiation is for the results to be fair and transparent.
The limitation of mining areas is the second contentious issue. According to the law, all areas of work that exceed the maximum limit of 100,000 hectares (ha) for minerals and 50,000 ha for coal should be returned to the state. This has proven to be difficult, since most of the large mining enterprises have been working areas beyond this threshold. Freeport has a working area of up to 1.8 million ha, and Arutmin about 70,000 ha, and Inco about 180,000 ha.
The third contentious issue is extension of concession contracts. A concession contract is terminated when it expires. After that, the management must submit to the state, represented by state or local enterprises, a proposal to obtain a new mining license. Contract extension with the old contractor can be achieved only if the contractor is a minority shareholder.
These three issues are problems for both the government and the enterprises to resolve. Currently, there are about 113 plans to renegotiate mining contracts, of which 37 CoWs are in the mining of metals and minerals and 76 are contracts of coal mining work (CCoWs). The majority of the mining enterprises seem to be in the “Partially Agree” mode for CoWs and in the “Agree to All Amendment Articles” mode for CCoWS.
The results must be beneficial to both sides, promoting transparency and fairness. Mining has been contributing greatly to the country’s economy, as well as wealth to a number of mining enterprises. In 2010, mining accounted for about 11.15 percent of GDP for Indonesia overall, and a much higher percentage for provinces such as Papua, Bangka-Belitung, West Nusa Tenggara and East Kalimantan. Mining also accounted for 16.91 percent of Indonesian exports, providing Rp 9.7 trillion of government revenue.
But annual average mining investment is not growing as expected. Only in the coal sector has any large-scale new production capacity been developed in recent years. The vast majority of the investment is for the replacement of mining infrastructure to sustain capacity.
Given the long lead times to find and develop new mines, production declines will be inevitable unless the renegotiation can enhance transparency and the mining policy environment is improved.
We have to remember that the country has some of the most prospective geological areas and according to one international survey, only some areas of Canada and Australia have better mineral prospects. Thus, it is possible for mining to make a much larger economic contribution at the local, provincial and national levels.
The renegotiation process cannot be allowed to hinder this contribution. We have to avoid losing our competitiveness at a time when other countries are seeking new mining investment.
By: Montty Girianna
Source: The Jakarta Post
The writer is director for energy, mineral resources and mining at the National Development Planning Agency (BAPPENAS).
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Saturday, 17 December 11
THE FREIGHT MARKET SEEMS TO HAVE ALMOST BOTTOMED OUT AND MAY REMAIN STEADY AT THESE LEVELS CAPT REDDY
COALspot.com - The BDI and Cape index closed lower this week with BDI closing at 1,888 points (down by 1.76 pct) and Cape index at 3,572 points (dow ...
Friday, 16 December 11
DRY BULK MARKET LOSES TRACK ON CAPESIZE LOSSES, SHIP FINANCING REMAINS TROUBLESOME - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market didn’t manage to sustain earlier gains, losing track yesterday, on reduced Capesize demand and persisting troubles in smal ...
Thursday, 15 December 11
BERAU SEES INDIA AS POTENTIAL MARKET FOR LOW-CALORIE COAL - THE JAKARTA POST
The Jakarta Post reported that, Publicly listed coal mining company PT Berau Coal Energy (BRAU), the fifth largest coal producer in Indonesia, sees ...
Thursday, 15 December 11
PANAMAX HARDLY AFFECTED BY THE RECENT FIRMER TENDENCY FOR THE BIG SISTERS - FEARNBULK
Handy
The rates are more or less the same as last week. Continent/US Gulf fixing at tick below USD 10k and Gulf/Continent levels at USD 25k. Trips ...
Thursday, 15 December 11
DRY BULK RATES TO REMAIN AT CURRENT LEVELS FOR THE MOST PART IN THE COMING MONTHS SAYS BIMCO - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
In its latest research note, BIMCO said that the Capesize Time Charter Average will remain at USD 20,000-30,000 per day but the tonnage oversupply w ...
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Showing 4926 to 4930 news of total 6871 |
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- Energy Link Ltd, New Zealand
- Medco Energi Mining Internasional
- Thiess Contractors Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Electricity Authority, New Zealand
- VISA Power Limited - India
- Commonwealth Bank - Australia
- Therma Luzon, Inc, Philippines
- Oldendorff Carriers - Singapore
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Dalmia Cement Bharat India
- Timah Investasi Mineral - Indoneisa
- Trasteel International SA, Italy
- Global Green Power PLC Corporation, Philippines
- Mjunction Services Limited - India
- Romanian Commodities Exchange
- Power Finance Corporation Ltd., India
- Merrill Lynch Commodities Europe
- Gujarat Mineral Development Corp Ltd - India
- Indika Energy - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Kepco SPC Power Corporation, Philippines
- Central Java Power - Indonesia
- Global Coal Blending Company Limited - Australia
- Indian Oil Corporation Limited
- Attock Cement Pakistan Limited
- Sojitz Corporation - Japan
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Coal and Oil Company - UAE
- Meralco Power Generation, Philippines
- Sree Jayajothi Cements Limited - India
- Indonesian Coal Mining Association
- CNBM International Corporation - China
- Orica Australia Pty. Ltd.
- Pendopo Energi Batubara - Indonesia
- Chettinad Cement Corporation Ltd - India
- Standard Chartered Bank - UAE
- Bhatia International Limited - India
- Global Business Power Corporation, Philippines
- Australian Commodity Traders Exchange
- Anglo American - United Kingdom
- Samtan Co., Ltd - South Korea
- PTC India Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- White Energy Company Limited
- Australian Coal Association
- Billiton Holdings Pty Ltd - Australia
- Jorong Barutama Greston.PT - Indonesia
- Antam Resourcindo - Indonesia
- Xindia Steels Limited - India
- Indian Energy Exchange, India
- Independent Power Producers Association of India
- Sinarmas Energy and Mining - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Krishnapatnam Port Company Ltd. - India
- TNB Fuel Sdn Bhd - Malaysia
- Thai Mozambique Logistica
- SMC Global Power, Philippines
- Semirara Mining Corp, Philippines
- Rio Tinto Coal - Australia
- Chamber of Mines of South Africa
- Sindya Power Generating Company Private Ltd
- Jindal Steel & Power Ltd - India
- Central Electricity Authority - India
- Baramulti Group, Indonesia
- Interocean Group of Companies - India
- London Commodity Brokers - England
- Wood Mackenzie - Singapore
- Kobexindo Tractors - Indoneisa
- Metalloyd Limited - United Kingdom
- Uttam Galva Steels Limited - India
- Rashtriya Ispat Nigam Limited - India
- IHS Mccloskey Coal Group - USA
- Cement Manufacturers Association - India
- Wilmar Investment Holdings
- Maheswari Brothers Coal Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Coastal Gujarat Power Limited - India
- Meenaskhi Energy Private Limited - India
- Malabar Cements Ltd - India
- Formosa Plastics Group - Taiwan
- Karbindo Abesyapradhi - Indoneisa
- Manunggal Multi Energi - Indonesia
- Siam City Cement PLC, Thailand
- Aboitiz Power Corporation - Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- The State Trading Corporation of India Ltd
- Bayan Resources Tbk. - Indonesia
- Energy Development Corp, Philippines
- Mintek Dendrill Indonesia
- Bangladesh Power Developement Board
- Latin American Coal - Colombia
- Price Waterhouse Coopers - Russia
- The Treasury - Australian Government
- Bukit Makmur.PT - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Salva Resources Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- Star Paper Mills Limited - India
- Binh Thuan Hamico - Vietnam
- Bharathi Cement Corporation - India
- Maharashtra Electricity Regulatory Commission - India
- Kideco Jaya Agung - Indonesia
- MS Steel International - UAE
- South Luzon Thermal Energy Corporation
- PetroVietnam Power Coal Import and Supply Company
- Renaissance Capital - South Africa
- Asmin Koalindo Tuhup - Indonesia
- SN Aboitiz Power Inc, Philippines
- Makarim & Taira - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Kartika Selabumi Mining - Indonesia
- SMG Consultants - Indonesia
- Vedanta Resources Plc - India
- Heidelberg Cement - Germany
- Indo Tambangraya Megah - Indonesia
- Madhucon Powers Ltd - India
- GMR Energy Limited - India
- Barasentosa Lestari - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Gujarat Sidhee Cement - India
- Videocon Industries ltd - India
- Carbofer General Trading SA - India
- Agrawal Coal Company - India
- IEA Clean Coal Centre - UK
- Globalindo Alam Lestari - Indonesia
- PNOC Exploration Corporation - Philippines
- ICICI Bank Limited - India
- Ind-Barath Power Infra Limited - India
- Jaiprakash Power Ventures ltd
- Bhushan Steel Limited - India
- Coalindo Energy - Indonesia
- Sakthi Sugars Limited - India
- Savvy Resources Ltd - HongKong
- Kumho Petrochemical, South Korea
- The University of Queensland
- Economic Council, Georgia
- ASAPP Information Group - India
- Mercuria Energy - Indonesia
- GAC Shipping (India) Pvt Ltd
- Indogreen Group - Indonesia
- Port Waratah Coal Services - Australia
- Straits Asia Resources Limited - Singapore
- Tamil Nadu electricity Board
- Siam City Cement - Thailand
- GVK Power & Infra Limited - India
- Bhoruka Overseas - Indonesia
- Tata Chemicals Ltd - India
- Intertek Mineral Services - Indonesia
- Electricity Generating Authority of Thailand
- Edison Trading Spa - Italy
- McConnell Dowell - Australia
- Deloitte Consulting - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- European Bulk Services B.V. - Netherlands
- Bahari Cakrawala Sebuku - Indonesia
- Miang Besar Coal Terminal - Indonesia
- OPG Power Generation Pvt Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Parry Sugars Refinery, India
- Planning Commission, India
- Ceylon Electricity Board - Sri Lanka
- Ambuja Cements Ltd - India
- Banpu Public Company Limited - Thailand
- Posco Energy - South Korea
- Riau Bara Harum - Indonesia
- Eastern Coal Council - USA
- Vizag Seaport Private Limited - India
- Georgia Ports Authority, United States
- Essar Steel Hazira Ltd - India
- PowerSource Philippines DevCo
- Aditya Birla Group - India
- Lanco Infratech Ltd - India
- Orica Mining Services - Indonesia
- Kaltim Prima Coal - Indonesia
- Ministry of Transport, Egypt
- Karaikal Port Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Altura Mining Limited, Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- India Bulls Power Limited - India
- CIMB Investment Bank - Malaysia
- Ministry of Mines - Canada
- Directorate Of Revenue Intelligence - India
- Borneo Indobara - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Iligan Light & Power Inc, Philippines
- Minerals Council of Australia
- Larsen & Toubro Limited - India
- Sical Logistics Limited - India
- Cigading International Bulk Terminal - Indonesia
- Bulk Trading Sa - Switzerland
- International Coal Ventures Pvt Ltd - India
- New Zealand Coal & Carbon
- Singapore Mercantile Exchange
- GN Power Mariveles Coal Plant, Philippines
- TeaM Sual Corporation - Philippines
- Goldman Sachs - Singapore
- Mercator Lines Limited - India
- Ministry of Finance - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Africa Commodities Group - South Africa
- San Jose City I Power Corp, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Parliament of New Zealand
- Eastern Energy - Thailand
- Bukit Baiduri Energy - Indonesia
- Grasim Industreis Ltd - India
- Toyota Tsusho Corporation, Japan
- Semirara Mining and Power Corporation, Philippines
- Petron Corporation, Philippines
- Marubeni Corporation - India
- LBH Netherlands Bv - Netherlands
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