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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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Tuesday, 22 November 11
ABM INVESTAMA SETS IPO AT RP 3,750
Insider Stories reported that, Integrated energy company PT ABM Investama Tbk has determined the IPO price at Rp3,750 (approximately US$ 0.415) per ...
Tuesday, 22 November 11
A SURPRISINGLY STRONG WEEK FOR THE CAPES - BRS
Positive gains for most of the segments this week, the exception being the Handysizes. Overall the BDI ended the week at 1,895 points (+3.3% week-on ...
Tuesday, 22 November 11
APPETITE FOR DRY BULK VESSELS SLOWS DOWN AT THE START OF THE WEEK - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market was down at the beginning of the week, as demand for Capesize vessels was particularly low. The industry’s benchmark, the ...
Monday, 21 November 11
CAPESIZES DRIVE MARKET LOWER, ANALYSTS DIVIDED ON DRY BULK OUTLOOK IN THE LONG RUN - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market ended the week on a sour note, with the industry’s benchmark heading downwards to 1,895 points, which represented a slight ...
Sunday, 20 November 11
THE FREIGHT MARKETS EXPECTED TO BE FIRM NEXT WEEK - VISTAAR
COALspot.com - The market continued to move up with all sectors gaining except for handy size.
The BDI was up by 3.26 pct and closed at 1895 poin ...
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Showing 4966 to 4970 news of total 6871 |
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- Semirara Mining and Power Corporation, Philippines
- Samtan Co., Ltd - South Korea
- Maharashtra Electricity Regulatory Commission - India
- Oldendorff Carriers - Singapore
- Mercuria Energy - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Star Paper Mills Limited - India
- India Bulls Power Limited - India
- Kartika Selabumi Mining - Indonesia
- Thai Mozambique Logistica
- Georgia Ports Authority, United States
- Bulk Trading Sa - Switzerland
- Salva Resources Pvt Ltd - India
- GVK Power & Infra Limited - India
- Simpson Spence & Young - Indonesia
- Ind-Barath Power Infra Limited - India
- Trasteel International SA, Italy
- Africa Commodities Group - South Africa
- Directorate Of Revenue Intelligence - India
- Manunggal Multi Energi - Indonesia
- Sarangani Energy Corporation, Philippines
- Australian Commodity Traders Exchange
- Indogreen Group - Indonesia
- IHS Mccloskey Coal Group - USA
- Pipit Mutiara Jaya. PT, Indonesia
- Intertek Mineral Services - Indonesia
- Larsen & Toubro Limited - India
- Standard Chartered Bank - UAE
- Neyveli Lignite Corporation Ltd, - India
- Global Coal Blending Company Limited - Australia
- Mjunction Services Limited - India
- Uttam Galva Steels Limited - India
- Eastern Coal Council - USA
- Baramulti Group, Indonesia
- The Treasury - Australian Government
- Renaissance Capital - South Africa
- Sojitz Corporation - Japan
- TeaM Sual Corporation - Philippines
- Bukit Baiduri Energy - Indonesia
- Aboitiz Power Corporation - Philippines
- Indian Energy Exchange, India
- SN Aboitiz Power Inc, Philippines
- SMC Global Power, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- The University of Queensland
- PTC India Limited - India
- Krishnapatnam Port Company Ltd. - India
- South Luzon Thermal Energy Corporation
- European Bulk Services B.V. - Netherlands
- Rio Tinto Coal - Australia
- Asmin Koalindo Tuhup - Indonesia
- Deloitte Consulting - India
- SMG Consultants - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Petron Corporation, Philippines
- PowerSource Philippines DevCo
- Sakthi Sugars Limited - India
- Videocon Industries ltd - India
- Coalindo Energy - Indonesia
- Antam Resourcindo - Indonesia
- Medco Energi Mining Internasional
- Ceylon Electricity Board - Sri Lanka
- Indika Energy - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- London Commodity Brokers - England
- Billiton Holdings Pty Ltd - Australia
- Kobexindo Tractors - Indoneisa
- Thiess Contractors Indonesia
- Ambuja Cements Ltd - India
- San Jose City I Power Corp, Philippines
- Iligan Light & Power Inc, Philippines
- The State Trading Corporation of India Ltd
- Mercator Lines Limited - India
- Binh Thuan Hamico - Vietnam
- Gujarat Electricity Regulatory Commission - India
- GMR Energy Limited - India
- Orica Australia Pty. Ltd.
- Global Green Power PLC Corporation, Philippines
- Gujarat Sidhee Cement - India
- Madhucon Powers Ltd - India
- Kaltim Prima Coal - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Grasim Industreis Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Toyota Tsusho Corporation, Japan
- Siam City Cement - Thailand
- PNOC Exploration Corporation - Philippines
- Kalimantan Lumbung Energi - Indonesia
- Marubeni Corporation - India
- McConnell Dowell - Australia
- Electricity Generating Authority of Thailand
- Central Electricity Authority - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Orica Mining Services - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Indian Oil Corporation Limited
- Malabar Cements Ltd - India
- Bharathi Cement Corporation - India
- Sindya Power Generating Company Private Ltd
- Bhushan Steel Limited - India
- Economic Council, Georgia
- Parry Sugars Refinery, India
- Bukit Makmur.PT - Indonesia
- Kideco Jaya Agung - Indonesia
- Edison Trading Spa - Italy
- Independent Power Producers Association of India
- Alfred C Toepfer International GmbH - Germany
- Chettinad Cement Corporation Ltd - India
- Electricity Authority, New Zealand
- Siam City Cement PLC, Thailand
- Indonesian Coal Mining Association
- Wilmar Investment Holdings
- Xindia Steels Limited - India
- ASAPP Information Group - India
- Tamil Nadu electricity Board
- CNBM International Corporation - China
- Attock Cement Pakistan Limited
- Coal and Oil Company - UAE
- Rashtriya Ispat Nigam Limited - India
- Power Finance Corporation Ltd., India
- LBH Netherlands Bv - Netherlands
- Eastern Energy - Thailand
- Energy Link Ltd, New Zealand
- IEA Clean Coal Centre - UK
- Port Waratah Coal Services - Australia
- Borneo Indobara - Indonesia
- Price Waterhouse Coopers - Russia
- Leighton Contractors Pty Ltd - Australia
- PetroVietnam Power Coal Import and Supply Company
- Jindal Steel & Power Ltd - India
- MS Steel International - UAE
- Romanian Commodities Exchange
- Commonwealth Bank - Australia
- Bangladesh Power Developement Board
- Banpu Public Company Limited - Thailand
- Lanco Infratech Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Energy Development Corp, Philippines
- Semirara Mining Corp, Philippines
- Bhatia International Limited - India
- OPG Power Generation Pvt Ltd - India
- Tata Chemicals Ltd - India
- Dalmia Cement Bharat India
- Chamber of Mines of South Africa
- Sical Logistics Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ministry of Finance - Indonesia
- Parliament of New Zealand
- Timah Investasi Mineral - Indoneisa
- Agrawal Coal Company - India
- Maheswari Brothers Coal Limited - India
- Makarim & Taira - Indonesia
- Wood Mackenzie - Singapore
- Australian Coal Association
- Holcim Trading Pte Ltd - Singapore
- VISA Power Limited - India
- Jaiprakash Power Ventures ltd
- Posco Energy - South Korea
- Kohat Cement Company Ltd. - Pakistan
- CIMB Investment Bank - Malaysia
- Riau Bara Harum - Indonesia
- Carbofer General Trading SA - India
- Minerals Council of Australia
- Bayan Resources Tbk. - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Essar Steel Hazira Ltd - India
- Global Business Power Corporation, Philippines
- Cement Manufacturers Association - India
- White Energy Company Limited
- ICICI Bank Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Indo Tambangraya Megah - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Vizag Seaport Private Limited - India
- Interocean Group of Companies - India
- Meralco Power Generation, Philippines
- Kumho Petrochemical, South Korea
- Straits Asia Resources Limited - Singapore
- Sree Jayajothi Cements Limited - India
- Savvy Resources Ltd - HongKong
- Globalindo Alam Lestari - Indonesia
- Ministry of Transport, Egypt
- Directorate General of MIneral and Coal - Indonesia
- Central Java Power - Indonesia
- Pendopo Energi Batubara - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Formosa Plastics Group - Taiwan
- Heidelberg Cement - Germany
- Therma Luzon, Inc, Philippines
- International Coal Ventures Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- New Zealand Coal & Carbon
- Mintek Dendrill Indonesia
- Altura Mining Limited, Indonesia
- Coastal Gujarat Power Limited - India
- Goldman Sachs - Singapore
- Meenaskhi Energy Private Limited - India
- Karaikal Port Pvt Ltd - India
- Aditya Birla Group - India
- Kepco SPC Power Corporation, Philippines
- Merrill Lynch Commodities Europe
- Singapore Mercantile Exchange
- Bhoruka Overseas - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- GAC Shipping (India) Pvt Ltd
- Vedanta Resources Plc - India
- Karbindo Abesyapradhi - Indoneisa
- Barasentosa Lestari - Indonesia
- Ministry of Mines - Canada
- AsiaOL BioFuels Corp., Philippines
- Latin American Coal - Colombia
- Anglo American - United Kingdom
- Metalloyd Limited - United Kingdom
- Planning Commission, India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bukit Asam (Persero) Tbk - Indonesia
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