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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, 29 January 21
OPEC+, COVID-19 AND ENERGY TRANSITION - 3 THEMES IMPACTING OIL MARKETS AND REFINING IN 2021 - WOOD MACKENZIE
Wood Mackenzie’s latest outlook report shows that the art of balancing oil markets and the refining sector in 2021 hinges upon three key them ...
Thursday, 28 January 21
STRONG CHINESE THERMAL COAL IMPORTS TO BENEFIT INDONESIAN MINERS IN THE NEAR TERM - FITCH RATINGS
China's thermal coal imports are likely to remain strong ahead of the Chinese New Year in mid-February on robust demand, high utilisation at do ...
Thursday, 28 January 21
WIND PROPULSION FOR DRY BULK CARRIERS - OLDENDORFF
Oldendorff Carriers (OC) has signed a Joint Development Project (JDP) with Anemoi Marine Technologies (Anemoi), Lloyd’s Register (LR) and Sha ...
Thursday, 28 January 21
BUMA PRICED A USD400 MILLION 7.75% 5-YEAR SENIOR NOTES
PT Delta Dunia Makmur Tbk. announced that its subsidiary, PT Bukit Makmur Mandiri Utama priced a USD400 million 5-year (non-callable 2-year)& ...
Wednesday, 27 January 21
MARKET INSIGHT - INTERMODAL
As we have entered the era off renewable energies, all industries globally give max effort to minimize their carbon footprint and consequently thei ...
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Showing 651 to 655 news of total 6871 |
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- Latin American Coal - Colombia
- Bulk Trading Sa - Switzerland
- Mintek Dendrill Indonesia
- Siam City Cement PLC, Thailand
- Jorong Barutama Greston.PT - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Simpson Spence & Young - Indonesia
- PTC India Limited - India
- GAC Shipping (India) Pvt Ltd
- Planning Commission, India
- Kohat Cement Company Ltd. - Pakistan
- Alfred C Toepfer International GmbH - Germany
- Commonwealth Bank - Australia
- Coalindo Energy - Indonesia
- India Bulls Power Limited - India
- Kartika Selabumi Mining - Indonesia
- Global Business Power Corporation, Philippines
- Kumho Petrochemical, South Korea
- Chettinad Cement Corporation Ltd - India
- Australian Coal Association
- Therma Luzon, Inc, Philippines
- Edison Trading Spa - Italy
- Binh Thuan Hamico - Vietnam
- SMC Global Power, Philippines
- Banpu Public Company Limited - Thailand
- ICICI Bank Limited - India
- Tamil Nadu electricity Board
- Formosa Plastics Group - Taiwan
- European Bulk Services B.V. - Netherlands
- Renaissance Capital - South Africa
- Directorate General of MIneral and Coal - Indonesia
- Cement Manufacturers Association - India
- Bangladesh Power Developement Board
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kaltim Prima Coal - Indonesia
- Iligan Light & Power Inc, Philippines
- Neyveli Lignite Corporation Ltd, - India
- SN Aboitiz Power Inc, Philippines
- Globalindo Alam Lestari - Indonesia
- Grasim Industreis Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Sindya Power Generating Company Private Ltd
- Sical Logistics Limited - India
- Holcim Trading Pte Ltd - Singapore
- Orica Mining Services - Indonesia
- Sarangani Energy Corporation, Philippines
- San Jose City I Power Corp, Philippines
- Price Waterhouse Coopers - Russia
- Power Finance Corporation Ltd., India
- Indo Tambangraya Megah - Indonesia
- Tata Chemicals Ltd - India
- Salva Resources Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- IEA Clean Coal Centre - UK
- Coal and Oil Company - UAE
- Aditya Birla Group - India
- Baramulti Group, Indonesia
- Madhucon Powers Ltd - India
- Bhushan Steel Limited - India
- Sakthi Sugars Limited - India
- International Coal Ventures Pvt Ltd - India
- Mercator Lines Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Ministry of Transport, Egypt
- Independent Power Producers Association of India
- Central Java Power - Indonesia
- CIMB Investment Bank - Malaysia
- Electricity Generating Authority of Thailand
- Star Paper Mills Limited - India
- Essar Steel Hazira Ltd - India
- Borneo Indobara - Indonesia
- Kideco Jaya Agung - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Orica Australia Pty. Ltd.
- Meralco Power Generation, Philippines
- Intertek Mineral Services - Indonesia
- Oldendorff Carriers - Singapore
- Antam Resourcindo - Indonesia
- Toyota Tsusho Corporation, Japan
- Economic Council, Georgia
- PNOC Exploration Corporation - Philippines
- Chamber of Mines of South Africa
- GMR Energy Limited - India
- Mjunction Services Limited - India
- Posco Energy - South Korea
- Savvy Resources Ltd - HongKong
- Indian Oil Corporation Limited
- Minerals Council of Australia
- PowerSource Philippines DevCo
- Sojitz Corporation - Japan
- Coastal Gujarat Power Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Krishnapatnam Port Company Ltd. - India
- Goldman Sachs - Singapore
- Bukit Makmur.PT - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Indian Energy Exchange, India
- Carbofer General Trading SA - India
- Sinarmas Energy and Mining - Indonesia
- Interocean Group of Companies - India
- Attock Cement Pakistan Limited
- Medco Energi Mining Internasional
- ASAPP Information Group - India
- Bhoruka Overseas - Indonesia
- IHS Mccloskey Coal Group - USA
- TeaM Sual Corporation - Philippines
- Petron Corporation, Philippines
- Agrawal Coal Company - India
- Merrill Lynch Commodities Europe
- Indogreen Group - Indonesia
- Bayan Resources Tbk. - Indonesia
- London Commodity Brokers - England
- CNBM International Corporation - China
- Ministry of Mines - Canada
- Bukit Baiduri Energy - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Altura Mining Limited, Indonesia
- Marubeni Corporation - India
- Gujarat Electricity Regulatory Commission - India
- Videocon Industries ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Meenaskhi Energy Private Limited - India
- Parliament of New Zealand
- Indika Energy - Indonesia
- Parry Sugars Refinery, India
- Karaikal Port Pvt Ltd - India
- Energy Link Ltd, New Zealand
- Vijayanagar Sugar Pvt Ltd - India
- Timah Investasi Mineral - Indoneisa
- Kapuas Tunggal Persada - Indonesia
- Energy Development Corp, Philippines
- Electricity Authority, New Zealand
- GVK Power & Infra Limited - India
- The State Trading Corporation of India Ltd
- Pipit Mutiara Jaya. PT, Indonesia
- Riau Bara Harum - Indonesia
- Sree Jayajothi Cements Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Gujarat Sidhee Cement - India
- Maheswari Brothers Coal Limited - India
- Port Waratah Coal Services - Australia
- Ministry of Finance - Indonesia
- Dalmia Cement Bharat India
- Lanco Infratech Ltd - India
- Malabar Cements Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Samtan Co., Ltd - South Korea
- AsiaOL BioFuels Corp., Philippines
- Bharathi Cement Corporation - India
- Singapore Mercantile Exchange
- Metalloyd Limited - United Kingdom
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- VISA Power Limited - India
- Thiess Contractors Indonesia
- Indonesian Coal Mining Association
- Jindal Steel & Power Ltd - India
- Bhatia International Limited - India
- Vedanta Resources Plc - India
- SMG Consultants - Indonesia
- Australian Commodity Traders Exchange
- Makarim & Taira - Indonesia
- Semirara Mining Corp, Philippines
- Anglo American - United Kingdom
- Heidelberg Cement - Germany
- Wood Mackenzie - Singapore
- Straits Asia Resources Limited - Singapore
- Directorate Of Revenue Intelligence - India
- Rashtriya Ispat Nigam Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Vizag Seaport Private Limited - India
- Barasentosa Lestari - Indonesia
- Larsen & Toubro Limited - India
- Rio Tinto Coal - Australia
- Eastern Energy - Thailand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Africa Commodities Group - South Africa
- Asmin Koalindo Tuhup - Indonesia
- Mercuria Energy - Indonesia
- White Energy Company Limited
- OPG Power Generation Pvt Ltd - India
- Kobexindo Tractors - Indoneisa
- Miang Besar Coal Terminal - Indonesia
- The Treasury - Australian Government
- Georgia Ports Authority, United States
- New Zealand Coal & Carbon
- Thai Mozambique Logistica
- South Luzon Thermal Energy Corporation
- Global Coal Blending Company Limited - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- McConnell Dowell - Australia
- Central Electricity Authority - India
- Ambuja Cements Ltd - India
- Ind-Barath Power Infra Limited - India
- Standard Chartered Bank - UAE
- Wilmar Investment Holdings
- LBH Netherlands Bv - Netherlands
- Xindia Steels Limited - India
- Romanian Commodities Exchange
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kepco SPC Power Corporation, Philippines
- Global Green Power PLC Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- Eastern Coal Council - USA
- Siam City Cement - Thailand
- Billiton Holdings Pty Ltd - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Trasteel International SA, Italy
- Semirara Mining and Power Corporation, Philippines
- Pendopo Energi Batubara - Indonesia
- The University of Queensland
- Aboitiz Power Corporation - Philippines
- Uttam Galva Steels Limited - India
- Deloitte Consulting - India
- MS Steel International - UAE
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