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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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Wednesday, 22 November 23
INDIA: GOVERNMENT PLANS 1.4 BILLION TONNE COAL OUTPUT BY 2027 - LIVEMINT
The Union coal ministry on Monday announced plans to increase India’s coal production to 1.404 billion tonne by 2027, with an eye to further ...
Wednesday, 22 November 23
OBLIGATION. INDONESIA AIMS TO START COLLECTING LEVIES FROM COAL MINERS IN JANUARY - REUTERS
Indonesia plans to start collecting levies from coal miners in January to be used to compensate miners who sell coal to the state utility at lower ...
Tuesday, 21 November 23
INDIAN COAL POWER PLANTS’ CAPACITY UTILISATION WILL IMPROVE TO 65% THIS FISCAL: - CRISIL
Coal-based thermal power units’ plant load factor (PLF) or capacity utilisation will improve to 65 percent in the current fiscal year despite ...
Tuesday, 14 November 23
CAPITAL PRODUCT PARTNERS L.P. ANNOUNCES TRANSFORMATIVE TRANSACTION INCLUDING THE ACQUISITION OF 11 NEWBUILD LNG CARRIERS FOR $3.1 BILLION
Capital Product Partners L.P. announced that it has entered into an umbrella agreement (the “Umbrella Agreement”) with Capital Maritime ...
Tuesday, 14 November 23
COAL INDIA BEATS Q2 PROFIT VIEW ON HIGH POWER DEMAND AMID WEAK MONSOON - REUTERS
Coal India on Friday reported better-than-expected second-quarter profit, helped by high power demand and boosted production amid a weak monsoon.
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- Malabar Cements Ltd - India
- Orica Australia Pty. Ltd.
- Vizag Seaport Private Limited - India
- London Commodity Brokers - England
- San Jose City I Power Corp, Philippines
- Planning Commission, India
- Sakthi Sugars Limited - India
- Anglo American - United Kingdom
- Timah Investasi Mineral - Indoneisa
- Agrawal Coal Company - India
- PNOC Exploration Corporation - Philippines
- Formosa Plastics Group - Taiwan
- Intertek Mineral Services - Indonesia
- Coastal Gujarat Power Limited - India
- Coalindo Energy - Indonesia
- Tata Chemicals Ltd - India
- The Treasury - Australian Government
- Meenaskhi Energy Private Limited - India
- ASAPP Information Group - India
- IHS Mccloskey Coal Group - USA
- Banpu Public Company Limited - Thailand
- Kumho Petrochemical, South Korea
- OPG Power Generation Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Directorate Of Revenue Intelligence - India
- Wilmar Investment Holdings
- Electricity Authority, New Zealand
- McConnell Dowell - Australia
- Gujarat Electricity Regulatory Commission - India
- TNB Fuel Sdn Bhd - Malaysia
- Deloitte Consulting - India
- Uttam Galva Steels Limited - India
- Kapuas Tunggal Persada - Indonesia
- Straits Asia Resources Limited - Singapore
- Sical Logistics Limited - India
- Kobexindo Tractors - Indoneisa
- GAC Shipping (India) Pvt Ltd
- Karaikal Port Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Rio Tinto Coal - Australia
- Kideco Jaya Agung - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Star Paper Mills Limited - India
- Orica Mining Services - Indonesia
- Kepco SPC Power Corporation, Philippines
- Bhushan Steel Limited - India
- Cigading International Bulk Terminal - Indonesia
- European Bulk Services B.V. - Netherlands
- GMR Energy Limited - India
- Eastern Coal Council - USA
- Port Waratah Coal Services - Australia
- Essar Steel Hazira Ltd - India
- Ministry of Transport, Egypt
- Merrill Lynch Commodities Europe
- Marubeni Corporation - India
- Rashtriya Ispat Nigam Limited - India
- Sree Jayajothi Cements Limited - India
- Electricity Generating Authority of Thailand
- Riau Bara Harum - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- CNBM International Corporation - China
- PowerSource Philippines DevCo
- New Zealand Coal & Carbon
- Parliament of New Zealand
- Iligan Light & Power Inc, Philippines
- Ambuja Cements Ltd - India
- Savvy Resources Ltd - HongKong
- GVK Power & Infra Limited - India
- Mjunction Services Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Semirara Mining Corp, Philippines
- Metalloyd Limited - United Kingdom
- Thiess Contractors Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Kohat Cement Company Ltd. - Pakistan
- Karbindo Abesyapradhi - Indoneisa
- Vedanta Resources Plc - India
- Gujarat Mineral Development Corp Ltd - India
- Bhoruka Overseas - Indonesia
- Indo Tambangraya Megah - Indonesia
- Ind-Barath Power Infra Limited - India
- Minerals Council of Australia
- Indonesian Coal Mining Association
- Sarangani Energy Corporation, Philippines
- Bulk Trading Sa - Switzerland
- Ceylon Electricity Board - Sri Lanka
- Heidelberg Cement - Germany
- Central Electricity Authority - India
- Simpson Spence & Young - Indonesia
- Wood Mackenzie - Singapore
- Energy Development Corp, Philippines
- Bukit Baiduri Energy - Indonesia
- Jaiprakash Power Ventures ltd
- Kartika Selabumi Mining - Indonesia
- Grasim Industreis Ltd - India
- Energy Link Ltd, New Zealand
- Pipit Mutiara Jaya. PT, Indonesia
- Larsen & Toubro Limited - India
- Oldendorff Carriers - Singapore
- Toyota Tsusho Corporation, Japan
- Eastern Energy - Thailand
- Kaltim Prima Coal - Indonesia
- Borneo Indobara - Indonesia
- Thai Mozambique Logistica
- VISA Power Limited - India
- ICICI Bank Limited - India
- Videocon Industries ltd - India
- SN Aboitiz Power Inc, Philippines
- Mercator Lines Limited - India
- Tamil Nadu electricity Board
- Gujarat Sidhee Cement - India
- Meralco Power Generation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Maheswari Brothers Coal Limited - India
- Sojitz Corporation - Japan
- Standard Chartered Bank - UAE
- Commonwealth Bank - Australia
- Bhatia International Limited - India
- Lanco Infratech Ltd - India
- Petron Corporation, Philippines
- Parry Sugars Refinery, India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Posco Energy - South Korea
- Offshore Bulk Terminal Pte Ltd, Singapore
- Aditya Birla Group - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ministry of Mines - Canada
- SMC Global Power, Philippines
- Altura Mining Limited, Indonesia
- Samtan Co., Ltd - South Korea
- Chamber of Mines of South Africa
- Goldman Sachs - Singapore
- LBH Netherlands Bv - Netherlands
- MS Steel International - UAE
- Alfred C Toepfer International GmbH - Germany
- Antam Resourcindo - Indonesia
- IEA Clean Coal Centre - UK
- Mintek Dendrill Indonesia
- Central Java Power - Indonesia
- Indian Oil Corporation Limited
- Pendopo Energi Batubara - Indonesia
- South Luzon Thermal Energy Corporation
- Billiton Holdings Pty Ltd - Australia
- Siam City Cement PLC, Thailand
- Bangladesh Power Developement Board
- CIMB Investment Bank - Malaysia
- Xindia Steels Limited - India
- Dalmia Cement Bharat India
- Asmin Koalindo Tuhup - Indonesia
- Latin American Coal - Colombia
- Sindya Power Generating Company Private Ltd
- Indian Energy Exchange, India
- Renaissance Capital - South Africa
- Aboitiz Power Corporation - Philippines
- India Bulls Power Limited - India
- Makarim & Taira - Indonesia
- Trasteel International SA, Italy
- Australian Commodity Traders Exchange
- Siam City Cement - Thailand
- TeaM Sual Corporation - Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Chettinad Cement Corporation Ltd - India
- Mercuria Energy - Indonesia
- Coal and Oil Company - UAE
- SMG Consultants - Indonesia
- Carbofer General Trading SA - India
- Leighton Contractors Pty Ltd - Australia
- Manunggal Multi Energi - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Cement Manufacturers Association - India
- Global Green Power PLC Corporation, Philippines
- Independent Power Producers Association of India
- Barasentosa Lestari - Indonesia
- Bukit Makmur.PT - Indonesia
- Jindal Steel & Power Ltd - India
- Global Coal Blending Company Limited - Australia
- AsiaOL BioFuels Corp., Philippines
- Krishnapatnam Port Company Ltd. - India
- Power Finance Corporation Ltd., India
- International Coal Ventures Pvt Ltd - India
- Bharathi Cement Corporation - India
- Holcim Trading Pte Ltd - Singapore
- Baramulti Group, Indonesia
- Therma Luzon, Inc, Philippines
- Georgia Ports Authority, United States
- Interocean Group of Companies - India
- Bahari Cakrawala Sebuku - Indonesia
- Bayan Resources Tbk. - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Salva Resources Pvt Ltd - India
- Romanian Commodities Exchange
- Binh Thuan Hamico - Vietnam
- Edison Trading Spa - Italy
- Maharashtra Electricity Regulatory Commission - India
- The University of Queensland
- Indika Energy - Indonesia
- Indogreen Group - Indonesia
- Madhucon Powers Ltd - India
- Price Waterhouse Coopers - Russia
- Miang Besar Coal Terminal - Indonesia
- Economic Council, Georgia
- The State Trading Corporation of India Ltd
- Globalindo Alam Lestari - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Singapore Mercantile Exchange
- White Energy Company Limited
- PetroVietnam Power Coal Import and Supply Company
- Attock Cement Pakistan Limited
- Africa Commodities Group - South Africa
- PTC India Limited - India
- Ministry of Finance - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Medco Energi Mining Internasional
- Australian Coal Association
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