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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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Monday, 04 January 21
BLISS FOR SHIPOWNERS! DAMAGES MAY BE CLAIMED IN ADDITION TO DEMURRAGE FOR VOYAGE CHARTERPARTY DELAY - WFW
KNOWLEDGE TO ELEVATE
In a significant decision for the maritime sector, The Eternal Bliss[1], the English Commercial Court has resol ...
Sunday, 03 January 21
INDIA: COMMERCE MINISTRY LAUNCHES COAL IMPORT MONITORING SYSTEM - PTI
CIMS shall require importers to submit advance information in an online system for imports of items and obtain an automatic registration number by ...
Wednesday, 30 December 20
A LOOK BACK INTO 2020: THE HEADWINDS, THE TAILWINDS AND EVERYTHING IN BETWEEN - SIGNAL
There is no doubt that 2020 has been a turbulent year for commercial shipping. The coronavirus pandemic has shaken the global maritime transport. T ...
Tuesday, 29 December 20
CHINA TAIYUAN COAL TRANSACTION PRICE INDEX UP 0.66 PCT - XINHUA
China Taiyuan coal transaction price index stood at 134.78 points Monday, up 0.66 percent week on week.
The index, released by China ...
Tuesday, 29 December 20
CORROSION-RESISTANT STEELS FOR CARGO OIL TANKS - DNV GL
KNOWLEDGE TO ELEVATE
Crude oil is a complex mixture of substances at varying ratios and in most cases contains at least some salt water. ...
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- Minerals Council of Australia
- Australian Coal Association
- Tata Chemicals Ltd - India
- Uttam Galva Steels Limited - India
- Trasteel International SA, Italy
- Posco Energy - South Korea
- Coastal Gujarat Power Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Indian Energy Exchange, India
- Banpu Public Company Limited - Thailand
- Romanian Commodities Exchange
- Orica Mining Services - Indonesia
- Parliament of New Zealand
- Vedanta Resources Plc - India
- Gujarat Mineral Development Corp Ltd - India
- Baramulti Group, Indonesia
- CIMB Investment Bank - Malaysia
- PetroVietnam Power Coal Import and Supply Company
- Alfred C Toepfer International GmbH - Germany
- Sakthi Sugars Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Global Business Power Corporation, Philippines
- TeaM Sual Corporation - Philippines
- Semirara Mining Corp, Philippines
- Ceylon Electricity Board - Sri Lanka
- Global Green Power PLC Corporation, Philippines
- Samtan Co., Ltd - South Korea
- Holcim Trading Pte Ltd - Singapore
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Semirara Mining and Power Corporation, Philippines
- Bhoruka Overseas - Indonesia
- Bangladesh Power Developement Board
- Wood Mackenzie - Singapore
- Manunggal Multi Energi - Indonesia
- Chamber of Mines of South Africa
- Indika Energy - Indonesia
- Siam City Cement - Thailand
- Miang Besar Coal Terminal - Indonesia
- Jaiprakash Power Ventures ltd
- Coal and Oil Company - UAE
- SN Aboitiz Power Inc, Philippines
- The Treasury - Australian Government
- Aditya Birla Group - India
- Siam City Cement PLC, Thailand
- Riau Bara Harum - Indonesia
- Jindal Steel & Power Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Grasim Industreis Ltd - India
- Meralco Power Generation, Philippines
- Barasentosa Lestari - Indonesia
- Formosa Plastics Group - Taiwan
- Ministry of Mines - Canada
- Marubeni Corporation - India
- Sinarmas Energy and Mining - Indonesia
- Independent Power Producers Association of India
- Sindya Power Generating Company Private Ltd
- Globalindo Alam Lestari - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Makarim & Taira - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Thai Mozambique Logistica
- Toyota Tsusho Corporation, Japan
- Sical Logistics Limited - India
- Chettinad Cement Corporation Ltd - India
- Bulk Trading Sa - Switzerland
- Pipit Mutiara Jaya. PT, Indonesia
- Goldman Sachs - Singapore
- PTC India Limited - India
- Power Finance Corporation Ltd., India
- Metalloyd Limited - United Kingdom
- Commonwealth Bank - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Carbofer General Trading SA - India
- Port Waratah Coal Services - Australia
- Videocon Industries ltd - India
- Global Coal Blending Company Limited - Australia
- Heidelberg Cement - Germany
- Anglo American - United Kingdom
- Madhucon Powers Ltd - India
- Binh Thuan Hamico - Vietnam
- Electricity Generating Authority of Thailand
- Ind-Barath Power Infra Limited - India
- Straits Asia Resources Limited - Singapore
- Sarangani Energy Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- PowerSource Philippines DevCo
- Bukit Baiduri Energy - Indonesia
- Antam Resourcindo - Indonesia
- Energy Development Corp, Philippines
- Bhatia International Limited - India
- Intertek Mineral Services - Indonesia
- Ministry of Finance - Indonesia
- Directorate Of Revenue Intelligence - India
- Bukit Makmur.PT - Indonesia
- Therma Luzon, Inc, Philippines
- Sojitz Corporation - Japan
- The State Trading Corporation of India Ltd
- Indo Tambangraya Megah - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Ministry of Transport, Egypt
- Indian Oil Corporation Limited
- Timah Investasi Mineral - Indoneisa
- Meenaskhi Energy Private Limited - India
- Wilmar Investment Holdings
- Borneo Indobara - Indonesia
- Agrawal Coal Company - India
- Maheswari Brothers Coal Limited - India
- GVK Power & Infra Limited - India
- Deloitte Consulting - India
- Latin American Coal - Colombia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Edison Trading Spa - Italy
- GAC Shipping (India) Pvt Ltd
- Xindia Steels Limited - India
- Parry Sugars Refinery, India
- VISA Power Limited - India
- Bhushan Steel Limited - India
- Jorong Barutama Greston.PT - Indonesia
- The University of Queensland
- Mjunction Services Limited - India
- Rio Tinto Coal - Australia
- Rashtriya Ispat Nigam Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- San Jose City I Power Corp, Philippines
- Eastern Energy - Thailand
- Tamil Nadu electricity Board
- Energy Link Ltd, New Zealand
- Oldendorff Carriers - Singapore
- Kohat Cement Company Ltd. - Pakistan
- Kobexindo Tractors - Indoneisa
- Krishnapatnam Port Company Ltd. - India
- Africa Commodities Group - South Africa
- Vizag Seaport Private Limited - India
- Iligan Light & Power Inc, Philippines
- SMC Global Power, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Standard Chartered Bank - UAE
- Ambuja Cements Ltd - India
- Kumho Petrochemical, South Korea
- ICICI Bank Limited - India
- Interocean Group of Companies - India
- Larsen & Toubro Limited - India
- ASAPP Information Group - India
- Salva Resources Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- International Coal Ventures Pvt Ltd - India
- MS Steel International - UAE
- Pendopo Energi Batubara - Indonesia
- Indogreen Group - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Kideco Jaya Agung - Indonesia
- Kaltim Prima Coal - Indonesia
- IEA Clean Coal Centre - UK
- IHS Mccloskey Coal Group - USA
- Malabar Cements Ltd - India
- OPG Power Generation Pvt Ltd - India
- South Luzon Thermal Energy Corporation
- Australian Commodity Traders Exchange
- Karaikal Port Pvt Ltd - India
- Mercator Lines Limited - India
- GMR Energy Limited - India
- McConnell Dowell - Australia
- Lanco Infratech Ltd - India
- AsiaOL BioFuels Corp., Philippines
- India Bulls Power Limited - India
- Sree Jayajothi Cements Limited - India
- Eastern Coal Council - USA
- Altura Mining Limited, Indonesia
- Petron Corporation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indonesian Coal Mining Association
- Kartika Selabumi Mining - Indonesia
- Gujarat Sidhee Cement - India
- Karbindo Abesyapradhi - Indoneisa
- Renaissance Capital - South Africa
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Orica Australia Pty. Ltd.
- Bayan Resources Tbk. - Indonesia
- European Bulk Services B.V. - Netherlands
- Mercuria Energy - Indonesia
- New Zealand Coal & Carbon
- Mintek Dendrill Indonesia
- Central Java Power - Indonesia
- SMG Consultants - Indonesia
- Star Paper Mills Limited - India
- Kalimantan Lumbung Energi - Indonesia
- London Commodity Brokers - England
- Planning Commission, India
- Directorate General of MIneral and Coal - Indonesia
- Attock Cement Pakistan Limited
- Price Waterhouse Coopers - Russia
- Savvy Resources Ltd - HongKong
- Asmin Koalindo Tuhup - Indonesia
- Kepco SPC Power Corporation, Philippines
- Central Electricity Authority - India
- Aboitiz Power Corporation - Philippines
- Georgia Ports Authority, United States
- Electricity Authority, New Zealand
- Economic Council, Georgia
- Coalindo Energy - Indonesia
- Singapore Mercantile Exchange
- CNBM International Corporation - China
- Merrill Lynch Commodities Europe
- GN Power Mariveles Coal Plant, Philippines
- Simpson Spence & Young - Indonesia
- Cement Manufacturers Association - India
- White Energy Company Limited
- Leighton Contractors Pty Ltd - Australia
- PNOC Exploration Corporation - Philippines
- Billiton Holdings Pty Ltd - Australia
- Thiess Contractors Indonesia
- Dalmia Cement Bharat India
- Kapuas Tunggal Persada - Indonesia
- Bharathi Cement Corporation - India
- Medco Energi Mining Internasional
- LBH Netherlands Bv - Netherlands
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