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Thursday, 25 March 21
'OMNIBUS LAW' REGULATION ON INDONESIA’S ENERGY AND MINING SECTORS TO BOOST COAL PROCESSING BUT ALSO RAISES QUESTIONS - ABNR
 February 2021 saw the issuance of a raft of new government regulations to give effect to the reformist Job Creation Law (colloquially known as the Omnibus Law), which entered into force on 2 November 2020. In this ABNR legal update, we discuss Government Regulation No. 25 of 2021 on the Energy and Mineral Sectors.
The government has issued a new regulation to give effect to the provisions of the Omnibus Law[1] relating to the mineral, coal, geothermal and power sectors. While the regulation makes some important changes, the overall purpose appears to be primarily to codify existing secondary legislation governing the relevant sectors.
The new instrument, Government Regulation No. 25 of 2021 on the Energy and Mineral Sectors (the “Regulation”),[2] was issued on 2 February 2021.
Due to the wide-ranging scope of the Regulation, we confine our analysis to its key provisions in this ABNR Legal Update.
A. Mining sector
Under the Omnibus Law, the holder of a Production-Operations Mining Business License (“IUP”) or Special Production-Operations Mining Business License (“IUPK”) for coal may be entitled to a complete exemption from the payment of royalties if it processes its coal production domestically, compared to an obligation to pay royalties of 3% to 7% (depending of calorific value and mining method) if it does not process its production domestically. This incentive should help boost investment in the coal processing industry (e.g., coal slurry, coal gasification and coal liquefaction), which is currently less developed than the mineral processing and refining industry.
The Regulation provides that the financial incentive will be given after approval by the Minister of Finance. Although not expressly stated, we believe the Minister of Finance will require a recommendation from the Minister of Energy and Mineral Resources (“MEMR”) before giving such approval as the Regulation stipulates the former should take into account considerations relating to energy sustainability and the fulfillment of industrial needs for raw materials, both of which come within the purview of the MEMR.
The financial incentives are not available for all coal that is produced by a mining license holder but only for certain types of coal that are processed domestically.
B. Geothermal Sector
The Regulation makes provision for the imposition of administrative sanctions and penalties on geothermal businesses that: (i) indirectly use geothermal energy without the required license or in a way that contravenes their license; (ii) fail to commence activities in their allocated work area within the stipulated timeframe; or (iii) fail to comply with the obligations set out in their license or the laws and regulations in general. By contrast, the Geothermal Law only imposes criminal sanctions for non-compliance with licenses.
It is prohibited for a holder of a geothermal license to assign it to a third party. Any violation of this prohibition is subject to administrative sanctions. Further, it is prohibited, once again subject to sanctions, for the holder of a geothermal license to sell its shares on the Indonesia Stock Exchange (“IDX”) without MEMR approval prior to the exploration stage.
While the text of the Regulation in this regard appears to only apply to a geothermal company that is itself listed on the IDX, and not to the holding company of a geothermal company listed on the IDX, it is as yet unclear whether this particular provision will be construed narrowly so as to exclude a holding company or widely so as to include it. The Regulation also fails to explain how the prohibition will be implemented and, more specifically, whether the IDX will be required to monitor transfers of shares of IPB holders so as to ensure that the prohibition is not violated.
C. Power Sector
The Omnibus Law has relaxed the rules in a number of key areas of the power sector, including the rules on operations areas, electricity-sector support services and joint utilization of electricity networks. However, it also imposes new obligations on electricity consumers. These changes have now been further fleshed out in the Regulation.
Under the Regulation, the term “public interest electricity business” covers (i) electricity generation; (ii) electricity transmission; (iii) electricity distribution; and (iv) sale of electricity. These various activities can be integrated and conducted by a single undertaking. For that purpose, the holder of Public Interest Electricity Business License (Izin Usaha Penyedian Tenaga Listrik Untuk Kepentingan Umum) must apply for the allocation of an Operations Area, particularly for the distribution and sale of electricity. The Regulation further stipulates that MEMR must consider the following aspects in determining the allocation of Operations Areas:
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The existing holder of an Operations Area is no longer capable of supplying electricity;
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The existing holder of Operations Area is no longer capable of maintaining the quality and reliability of its electricity supply;
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The existing holder of an Operations Area surrenders a part or all of its Operations Area to MEMR;
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The Operations Area applied for is a remote area that has not been assigned to another Operations Area holder; and/or
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The Operations Area applied for is a designated area for the development of integrated energy sources in accordance with its power needs.
While in practice we expect that PT PLN (Persero), the state power company and largest player in the Indonesian power sector, will continue to dominate the development of new or existing Operations Areas, the considerations listed above could still open opportunities for private investors to proactively seek out prospective Operations Areas for development.
The Regulation also establishes the following licensing and reporting requirements for own-interest power producers (i.e., operators of captive power plants):
> 500 kW – requires an Own-Interest Electricity Business License (Izin Usaha Penyediaan Tenaga Listrik untuk Kepentingan Sendiri) from MEMR or relevant provincial governor, plus a certificate of operational worthiness.
< 500kW - must submit a prior written report to the Minister or relevant governor and satisfy technical specifications, as evidenced by a certificate of operational worthiness and other technical documents to be registered with MEMR.
It interesting to note that the Regulation also imposes various new obligations on electricity consumers, Including obligations to ensure the security of their electricity installations, to use electricity in accordance with its purposes, to pay their electricity bills and to comply with technical requirements in the power sector. A consumer may be sued for any losses suffered by the holder of a Public Interest Electricity Business License if they fail to perform their obligations. This provision may also be regarded as setting out the minimum provisions that should be incorporated in an electricity purchase agreement between a power provider and its customers, including industrial customers.
As regards the electricity support services sector (“Support Services”), a foreign investor that wishes to carry on business in this field has the option of establishing a representative office / Kantor Perwakilan Asing (“KPA”). The Support Services that can be performed by a KPA are restricted to a list of clearly defined activities, including consultation on electricity installations, construction and installation of electricity infrastructure, and the maintenance of power installations. The projects developed by a KPA must also come within the “high cost” category, with a minimum contract value of Rp 100 billion for construction and installation activities.
It should be noted in this regard that the Regulation is somewhat unclear. While it goes into noticeable detail on the rules governing KPA, it is silent as to the role to be played by foreign invested companies (PT PMA) in the electricity support services sector.
As mandated by the Omnibus Law, the Regulation further provides for the joint utilization of power transmission networks by telecommunication, multimedia and IT companies. Such joint utilization must be based on the permission of the network owner, which may only be given if the joint utilization does not have the potential to disrupt electricity supplies. The network owner must submit a report to MEMR on its consent to joint utilization, enclosing certain supporting documents, including the joint utilization agreement and details of the telecommunications equipment to be installed in the power transmission network.
ABNR Commentary
Despite the lack of clarity and question marks regarding some provisions, as mentioned above, the Regulation fills in some obvious gaps in the Omnibus Law relating to the mineral, coal and power sectors. However, there remain a number of outstanding issues that require attention. In this regard, the Regulation incorporates an enabling provision that allows MEMR to take whatever action is required to resolve any issues that are not, or are inadequately, addressed in the Regulation. This is a new type of catch-all “fix-it-up” provision in Indonesian law that is also used in a number of other sectoral regulations issued under the Omnibus Law. It will be interesting to see the extent to which the MEMR, as well as other ministries, avail of this power to make legislative and regulatory changes going ahead.
By partner Mr. Freddy Karyadi and senior associate Mr. Mahatma Hadhi
Source: ABNR
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Friday, 05 January 24
BANGLADESH’S 2023 COAL-FIRED POWER OUTPUT TRIPLED, EASING SHORTAGES - REUTERS
Bangladesh nearly tripled its coal-fired power output in 2023, a Reuters analysis of government data showed, helping it tide over the worst power s ...
Tuesday, 02 January 24
COAL TRADE CONTINUES TO HEAD EAST - BALTIC EXCHANGE
The global coal trade, once concentrated in the Pacific and Atlantic basins, is undergoing a significant transformation, as highlighted in the Inte ...
Tuesday, 02 January 24
COAL CARGOES: AVOIDING EXPLOSION AND SELF-HEATING - GARD
KNOWLEDGE TO ELEVATE
Despite its contribution to greenhouse gas emissions, global coal consumption climbed to an all-time high in 2022 and is ...
Tuesday, 02 January 24
SINOPEC FORECASTS CHINA’S COAL CONSUMPTION TO PEAK AROUND 2025 - REUTERS
China Petrochemical Corp, or Sinopec, expects coal consumption to peak around 2025 at 4.37 billion metric tons, the state energy group said in an o ...
Thursday, 07 December 23
CHINA TO SET UP COAL PRODUCTION RESERVE TO STABILISE PRICES - REUTERS
China will establish a back-up coal production system by 2027 to stabilise prices and secure coal supply, the state planner said on Wednesday, even ...
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Showing 61 to 65 news of total 6871 |
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- India Bulls Power Limited - India
- Madhucon Powers Ltd - India
- Renaissance Capital - South Africa
- Chamber of Mines of South Africa
- TNB Fuel Sdn Bhd - Malaysia
- Kideco Jaya Agung - Indonesia
- Rio Tinto Coal - Australia
- Samtan Co., Ltd - South Korea
- Neyveli Lignite Corporation Ltd, - India
- Cement Manufacturers Association - India
- TeaM Sual Corporation - Philippines
- Ind-Barath Power Infra Limited - India
- Africa Commodities Group - South Africa
- Central Java Power - Indonesia
- Ceylon Electricity Board - Sri Lanka
- GMR Energy Limited - India
- Aditya Birla Group - India
- Agrawal Coal Company - India
- Coastal Gujarat Power Limited - India
- SMC Global Power, Philippines
- IHS Mccloskey Coal Group - USA
- Parliament of New Zealand
- Minerals Council of Australia
- PTC India Limited - India
- Latin American Coal - Colombia
- Coalindo Energy - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Banpu Public Company Limited - Thailand
- Edison Trading Spa - Italy
- Miang Besar Coal Terminal - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Bhatia International Limited - India
- Wood Mackenzie - Singapore
- Directorate General of MIneral and Coal - Indonesia
- Sakthi Sugars Limited - India
- Indogreen Group - Indonesia
- Standard Chartered Bank - UAE
- Price Waterhouse Coopers - Russia
- Indonesian Coal Mining Association
- Romanian Commodities Exchange
- ICICI Bank Limited - India
- OPG Power Generation Pvt Ltd - India
- Eastern Coal Council - USA
- Trasteel International SA, Italy
- Ambuja Cements Ltd - India
- Toyota Tsusho Corporation, Japan
- Sical Logistics Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Electricity Authority, New Zealand
- Siam City Cement - Thailand
- Malabar Cements Ltd - India
- Energy Development Corp, Philippines
- Iligan Light & Power Inc, Philippines
- Karaikal Port Pvt Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Pendopo Energi Batubara - Indonesia
- Meralco Power Generation, Philippines
- Planning Commission, India
- The University of Queensland
- Kobexindo Tractors - Indoneisa
- Attock Cement Pakistan Limited
- Cigading International Bulk Terminal - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Indo Tambangraya Megah - Indonesia
- Ministry of Finance - Indonesia
- Mercator Lines Limited - India
- Carbofer General Trading SA - India
- Siam City Cement PLC, Thailand
- Chettinad Cement Corporation Ltd - India
- Larsen & Toubro Limited - India
- Bukit Makmur.PT - Indonesia
- Savvy Resources Ltd - HongKong
- Semirara Mining and Power Corporation, Philippines
- Commonwealth Bank - Australia
- European Bulk Services B.V. - Netherlands
- Petron Corporation, Philippines
- New Zealand Coal & Carbon
- Independent Power Producers Association of India
- Kohat Cement Company Ltd. - Pakistan
- Global Coal Blending Company Limited - Australia
- Kartika Selabumi Mining - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Binh Thuan Hamico - Vietnam
- Vizag Seaport Private Limited - India
- Indian Oil Corporation Limited
- Sojitz Corporation - Japan
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Mjunction Services Limited - India
- Directorate Of Revenue Intelligence - India
- Petrochimia International Co. Ltd.- Taiwan
- SN Aboitiz Power Inc, Philippines
- Coal and Oil Company - UAE
- McConnell Dowell - Australia
- Goldman Sachs - Singapore
- Bukit Asam (Persero) Tbk - Indonesia
- Energy Link Ltd, New Zealand
- Sree Jayajothi Cements Limited - India
- Holcim Trading Pte Ltd - Singapore
- Vijayanagar Sugar Pvt Ltd - India
- Bayan Resources Tbk. - Indonesia
- Gujarat Sidhee Cement - India
- Singapore Mercantile Exchange
- PetroVietnam Power Coal Import and Supply Company
- Jorong Barutama Greston.PT - Indonesia
- London Commodity Brokers - England
- Simpson Spence & Young - Indonesia
- Timah Investasi Mineral - Indoneisa
- CIMB Investment Bank - Malaysia
- Meenaskhi Energy Private Limited - India
- Global Business Power Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- Kumho Petrochemical, South Korea
- International Coal Ventures Pvt Ltd - India
- Jindal Steel & Power Ltd - India
- Wilmar Investment Holdings
- Mercuria Energy - Indonesia
- Global Green Power PLC Corporation, Philippines
- Anglo American - United Kingdom
- Kaltim Prima Coal - Indonesia
- Kepco SPC Power Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- Mintek Dendrill Indonesia
- Tata Chemicals Ltd - India
- Merrill Lynch Commodities Europe
- SMG Consultants - Indonesia
- Indika Energy - Indonesia
- Vedanta Resources Plc - India
- Metalloyd Limited - United Kingdom
- Therma Luzon, Inc, Philippines
- Electricity Generating Authority of Thailand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- VISA Power Limited - India
- Leighton Contractors Pty Ltd - Australia
- Port Waratah Coal Services - Australia
- PNOC Exploration Corporation - Philippines
- Grasim Industreis Ltd - India
- Xindia Steels Limited - India
- PowerSource Philippines DevCo
- Bangladesh Power Developement Board
- Straits Asia Resources Limited - Singapore
- Georgia Ports Authority, United States
- Dalmia Cement Bharat India
- GVK Power & Infra Limited - India
- Sarangani Energy Corporation, Philippines
- Baramulti Group, Indonesia
- White Energy Company Limited
- ASAPP Information Group - India
- Bahari Cakrawala Sebuku - Indonesia
- Altura Mining Limited, Indonesia
- Uttam Galva Steels Limited - India
- Bhoruka Overseas - Indonesia
- Australian Coal Association
- Antam Resourcindo - Indonesia
- Economic Council, Georgia
- Medco Energi Mining Internasional
- Bank of Tokyo Mitsubishi UFJ Ltd
- Oldendorff Carriers - Singapore
- Australian Commodity Traders Exchange
- Ministry of Transport, Egypt
- Thai Mozambique Logistica
- Lanco Infratech Ltd - India
- Bharathi Cement Corporation - India
- Salva Resources Pvt Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Central Electricity Authority - India
- Globalindo Alam Lestari - Indonesia
- Thiess Contractors Indonesia
- Barasentosa Lestari - Indonesia
- Essar Steel Hazira Ltd - India
- San Jose City I Power Corp, Philippines
- Interocean Group of Companies - India
- Sinarmas Energy and Mining - Indonesia
- The State Trading Corporation of India Ltd
- Indian Energy Exchange, India
- Kalimantan Lumbung Energi - Indonesia
- Intertek Mineral Services - Indonesia
- Ministry of Mines - Canada
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Riau Bara Harum - Indonesia
- Formosa Plastics Group - Taiwan
- IEA Clean Coal Centre - UK
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Karbindo Abesyapradhi - Indoneisa
- Bukit Baiduri Energy - Indonesia
- Star Paper Mills Limited - India
- Sindya Power Generating Company Private Ltd
- Rashtriya Ispat Nigam Limited - India
- Borneo Indobara - Indonesia
- Heidelberg Cement - Germany
- Gujarat Mineral Development Corp Ltd - India
- Maheswari Brothers Coal Limited - India
- Bhushan Steel Limited - India
- Videocon Industries ltd - India
- Krishnapatnam Port Company Ltd. - India
- Posco Energy - South Korea
- Deloitte Consulting - India
- MS Steel International - UAE
- GN Power Mariveles Coal Plant, Philippines
- Orica Mining Services - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- South Luzon Thermal Energy Corporation
- Orica Australia Pty. Ltd.
- Alfred C Toepfer International GmbH - Germany
- Semirara Mining Corp, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Marubeni Corporation - India
- Aboitiz Power Corporation - Philippines
- Parry Sugars Refinery, India
- Eastern Energy - Thailand
- CNBM International Corporation - China
- Bulk Trading Sa - Switzerland
- Makarim & Taira - Indonesia
- Power Finance Corporation Ltd., India
- Jaiprakash Power Ventures ltd
- Manunggal Multi Energi - Indonesia
- The Treasury - Australian Government
- Tamil Nadu electricity Board
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