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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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- Pendopo Energi Batubara - Indonesia
- Semirara Mining Corp, Philippines
- Lanco Infratech Ltd - India
- Rio Tinto Coal - Australia
- The University of Queensland
- Ministry of Mines - Canada
- Heidelberg Cement - Germany
- Energy Link Ltd, New Zealand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bangladesh Power Developement Board
- Eastern Energy - Thailand
- Intertek Mineral Services - Indonesia
- The State Trading Corporation of India Ltd
- PTC India Limited - India
- India Bulls Power Limited - India
- Meenaskhi Energy Private Limited - India
- Global Business Power Corporation, Philippines
- Indo Tambangraya Megah - Indonesia
- Indika Energy - Indonesia
- CIMB Investment Bank - Malaysia
- Indogreen Group - Indonesia
- Binh Thuan Hamico - Vietnam
- Trasteel International SA, Italy
- Siam City Cement PLC, Thailand
- Oldendorff Carriers - Singapore
- Bharathi Cement Corporation - India
- Timah Investasi Mineral - Indoneisa
- Jindal Steel & Power Ltd - India
- Uttam Galva Steels Limited - India
- McConnell Dowell - Australia
- Malabar Cements Ltd - India
- Deloitte Consulting - India
- Australian Commodity Traders Exchange
- Romanian Commodities Exchange
- TNB Fuel Sdn Bhd - Malaysia
- Australian Coal Association
- Interocean Group of Companies - India
- Cement Manufacturers Association - India
- SN Aboitiz Power Inc, Philippines
- Formosa Plastics Group - Taiwan
- Holcim Trading Pte Ltd - Singapore
- Videocon Industries ltd - India
- Planning Commission, India
- San Jose City I Power Corp, Philippines
- Makarim & Taira - Indonesia
- Riau Bara Harum - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Singapore Mercantile Exchange
- AsiaOL BioFuels Corp., Philippines
- Madhucon Powers Ltd - India
- Antam Resourcindo - Indonesia
- Dalmia Cement Bharat India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Central Java Power - Indonesia
- Mercator Lines Limited - India
- Kobexindo Tractors - Indoneisa
- GMR Energy Limited - India
- ICICI Bank Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Minerals Council of Australia
- Global Green Power PLC Corporation, Philippines
- Coal and Oil Company - UAE
- Larsen & Toubro Limited - India
- Sakthi Sugars Limited - India
- Grasim Industreis Ltd - India
- Global Coal Blending Company Limited - Australia
- Sindya Power Generating Company Private Ltd
- Sree Jayajothi Cements Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Sarangani Energy Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sical Logistics Limited - India
- Bukit Makmur.PT - Indonesia
- Independent Power Producers Association of India
- Africa Commodities Group - South Africa
- Posco Energy - South Korea
- Asmin Koalindo Tuhup - Indonesia
- Ambuja Cements Ltd - India
- Mjunction Services Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Renaissance Capital - South Africa
- Merrill Lynch Commodities Europe
- Port Waratah Coal Services - Australia
- Semirara Mining and Power Corporation, Philippines
- Commonwealth Bank - Australia
- Therma Luzon, Inc, Philippines
- Leighton Contractors Pty Ltd - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- Mercuria Energy - Indonesia
- Tamil Nadu electricity Board
- Gujarat Sidhee Cement - India
- Price Waterhouse Coopers - Russia
- Thiess Contractors Indonesia
- White Energy Company Limited
- Savvy Resources Ltd - HongKong
- LBH Netherlands Bv - Netherlands
- Cigading International Bulk Terminal - Indonesia
- Indian Energy Exchange, India
- GN Power Mariveles Coal Plant, Philippines
- VISA Power Limited - India
- PNOC Exploration Corporation - Philippines
- Vedanta Resources Plc - India
- Orica Australia Pty. Ltd.
- Samtan Co., Ltd - South Korea
- IEA Clean Coal Centre - UK
- Star Paper Mills Limited - India
- Aboitiz Power Corporation - Philippines
- MS Steel International - UAE
- Georgia Ports Authority, United States
- Offshore Bulk Terminal Pte Ltd, Singapore
- Metalloyd Limited - United Kingdom
- Karaikal Port Pvt Ltd - India
- Carbofer General Trading SA - India
- TeaM Sual Corporation - Philippines
- New Zealand Coal & Carbon
- Kumho Petrochemical, South Korea
- Sinarmas Energy and Mining - Indonesia
- South Luzon Thermal Energy Corporation
- Coastal Gujarat Power Limited - India
- Kaltim Prima Coal - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Medco Energi Mining Internasional
- SMG Consultants - Indonesia
- The Treasury - Australian Government
- Xindia Steels Limited - India
- Chamber of Mines of South Africa
- CNBM International Corporation - China
- Standard Chartered Bank - UAE
- Toyota Tsusho Corporation, Japan
- Bhoruka Overseas - Indonesia
- IHS Mccloskey Coal Group - USA
- Maheswari Brothers Coal Limited - India
- Miang Besar Coal Terminal - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Kideco Jaya Agung - Indonesia
- Siam City Cement - Thailand
- Kapuas Tunggal Persada - Indonesia
- Agrawal Coal Company - India
- Barasentosa Lestari - Indonesia
- GAC Shipping (India) Pvt Ltd
- Wilmar Investment Holdings
- Aditya Birla Group - India
- PowerSource Philippines DevCo
- Ministry of Transport, Egypt
- Ministry of Finance - Indonesia
- London Commodity Brokers - England
- Indian Oil Corporation Limited
- Power Finance Corporation Ltd., India
- Simpson Spence & Young - Indonesia
- Globalindo Alam Lestari - Indonesia
- Parry Sugars Refinery, India
- Gujarat Electricity Regulatory Commission - India
- Alfred C Toepfer International GmbH - Germany
- Straits Asia Resources Limited - Singapore
- Eastern Coal Council - USA
- Chettinad Cement Corporation Ltd - India
- Economic Council, Georgia
- Krishnapatnam Port Company Ltd. - India
- OPG Power Generation Pvt Ltd - India
- Thai Mozambique Logistica
- GVK Power & Infra Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Marubeni Corporation - India
- Kalimantan Lumbung Energi - Indonesia
- Bhatia International Limited - India
- Kartika Selabumi Mining - Indonesia
- Bayan Resources Tbk. - Indonesia
- Ind-Barath Power Infra Limited - India
- Energy Development Corp, Philippines
- Parliament of New Zealand
- Directorate Of Revenue Intelligence - India
- Orica Mining Services - Indonesia
- Electricity Generating Authority of Thailand
- Attock Cement Pakistan Limited
- Directorate General of MIneral and Coal - Indonesia
- Meralco Power Generation, Philippines
- Mintek Dendrill Indonesia
- Anglo American - United Kingdom
- Electricity Authority, New Zealand
- Latin American Coal - Colombia
- Wood Mackenzie - Singapore
- ASAPP Information Group - India
- Iligan Light & Power Inc, Philippines
- Salva Resources Pvt Ltd - India
- Indonesian Coal Mining Association
- Vizag Seaport Private Limited - India
- European Bulk Services B.V. - Netherlands
- Bhushan Steel Limited - India
- Jaiprakash Power Ventures ltd
- Kohat Cement Company Ltd. - Pakistan
- Essar Steel Hazira Ltd - India
- Sojitz Corporation - Japan
- International Coal Ventures Pvt Ltd - India
- Coalindo Energy - Indonesia
- Banpu Public Company Limited - Thailand
- Bulk Trading Sa - Switzerland
- Baramulti Group, Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Tata Chemicals Ltd - India
- Manunggal Multi Energi - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Vijayanagar Sugar Pvt Ltd - India
- Edison Trading Spa - Italy
- SMC Global Power, Philippines
- Goldman Sachs - Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Altura Mining Limited, Indonesia
- Central Electricity Authority - India
- Borneo Indobara - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Kepco SPC Power Corporation, Philippines
- Petron Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Petrochimia International Co. Ltd.- Taiwan
- Bukit Baiduri Energy - Indonesia
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