We welcome article submissions from experts in the areas of coal, mining,
shipping, etc.
To Submit your article please click here.
|
|
|
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:
-
The existing holder of an Operations Area is no longer capable of supplying electricity;
-
The existing holder of Operations Area is no longer capable of maintaining the quality and reliability of its electricity supply;
-
The existing holder of an Operations Area surrenders a part or all of its Operations Area to MEMR;
-
The Operations Area applied for is a remote area that has not been assigned to another Operations Area holder; and/or
-
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
If you believe an article violates your rights or the rights of others, please contact us.
|
|
Friday, 02 August 24
COAL MARKET DEVELOPMENTS: FALLING PRICES AMID RECORD-HIGH OUTPUT - WORLD BANK
Coal prices inched up in May (m/m) following an 8 percent decline in 2024Q1. The Australian and South African benchmarks have plummeted more ...
Friday, 26 July 24
FUELEU MARITME IS COMING. IS YOUR CHARTERPARTY READY? - GARD
With less than six months to implementation of FuelEU Maritime in EU and EEA trades, there has been little published advice regarding how to alloca ...
Thursday, 04 July 24
INDIA'S COAL PRODUCTION RISES 14% IN JUNE - PTI
The country’s coal production rose by 14.49% to 84.63 million tonne (MT) in June. The country’s coal output was 73.92 MT in June last f ...
Tuesday, 02 July 24
NTPC CAPTIVE COAL OUTPUT GROWS 15% IN Q1; DESPATCH RISES 17%
State-owned NTPC on Monday reported a 15 per cent year-on-year increase in the production of coal from captives mines to 9.862 metric million tonne ...
Friday, 28 June 24
KOSPO INVITED BIDS FOR 400,000 MT OF MINIMUM 4000 NCV COAL FOR FIVE YEARS
Korea Southern Power Co., Ltd. (KOSPO), is inviting bids for total 400,000 MT of Low Calorific Value Coal for 5 years starting from July 2024 until ...
|
|
|
Showing 6 to 10 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Directorate Of Revenue Intelligence - India
- Ambuja Cements Ltd - India
- Central Electricity Authority - India
- Kapuas Tunggal Persada - Indonesia
- Kaltim Prima Coal - Indonesia
- Bayan Resources Tbk. - Indonesia
- Ministry of Finance - Indonesia
- Karaikal Port Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- Intertek Mineral Services - Indonesia
- Mercuria Energy - Indonesia
- Economic Council, Georgia
- European Bulk Services B.V. - Netherlands
- Bukit Asam (Persero) Tbk - Indonesia
- Sakthi Sugars Limited - India
- Bhushan Steel Limited - India
- Independent Power Producers Association of India
- Gujarat Mineral Development Corp Ltd - India
- Pendopo Energi Batubara - Indonesia
- Kepco SPC Power Corporation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Carbofer General Trading SA - India
- Anglo American - United Kingdom
- Uttam Galva Steels Limited - India
- Goldman Sachs - Singapore
- Madhucon Powers Ltd - India
- Posco Energy - South Korea
- India Bulls Power Limited - India
- Salva Resources Pvt Ltd - India
- Sojitz Corporation - Japan
- Latin American Coal - Colombia
- Renaissance Capital - South Africa
- ASAPP Information Group - India
- LBH Netherlands Bv - Netherlands
- Jindal Steel & Power Ltd - India
- Binh Thuan Hamico - Vietnam
- GVK Power & Infra Limited - India
- The University of Queensland
- CIMB Investment Bank - Malaysia
- GN Power Mariveles Coal Plant, Philippines
- Edison Trading Spa - Italy
- PTC India Limited - India
- Bukit Makmur.PT - Indonesia
- Bulk Trading Sa - Switzerland
- Bharathi Cement Corporation - India
- Merrill Lynch Commodities Europe
- Electricity Authority, New Zealand
- Indian Energy Exchange, India
- PowerSource Philippines DevCo
- Indonesian Coal Mining Association
- Offshore Bulk Terminal Pte Ltd, Singapore
- Rashtriya Ispat Nigam Limited - India
- South Luzon Thermal Energy Corporation
- White Energy Company Limited
- Ministry of Transport, Egypt
- Gujarat Electricity Regulatory Commission - India
- Bhoruka Overseas - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Cigading International Bulk Terminal - Indonesia
- Sarangani Energy Corporation, Philippines
- Indogreen Group - Indonesia
- Thai Mozambique Logistica
- Coastal Gujarat Power Limited - India
- Bukit Baiduri Energy - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Straits Asia Resources Limited - Singapore
- The State Trading Corporation of India Ltd
- Electricity Generating Authority of Thailand
- Energy Link Ltd, New Zealand
- Ministry of Mines - Canada
- Georgia Ports Authority, United States
- Meenaskhi Energy Private Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- SMC Global Power, Philippines
- Vedanta Resources Plc - India
- Xindia Steels Limited - India
- Gujarat Sidhee Cement - India
- Aditya Birla Group - India
- Videocon Industries ltd - India
- Sree Jayajothi Cements Limited - India
- Kartika Selabumi Mining - Indonesia
- GAC Shipping (India) Pvt Ltd
- Global Coal Blending Company Limited - Australia
- Asmin Koalindo Tuhup - Indonesia
- Tamil Nadu electricity Board
- Bhatia International Limited - India
- Commonwealth Bank - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- The Treasury - Australian Government
- Wilmar Investment Holdings
- Jaiprakash Power Ventures ltd
- Coal and Oil Company - UAE
- McConnell Dowell - Australia
- Eastern Energy - Thailand
- Central Java Power - Indonesia
- Romanian Commodities Exchange
- Kideco Jaya Agung - Indonesia
- Larsen & Toubro Limited - India
- Star Paper Mills Limited - India
- Chamber of Mines of South Africa
- OPG Power Generation Pvt Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Kobexindo Tractors - Indoneisa
- Leighton Contractors Pty Ltd - Australia
- Ceylon Electricity Board - Sri Lanka
- Holcim Trading Pte Ltd - Singapore
- TNB Fuel Sdn Bhd - Malaysia
- Orica Australia Pty. Ltd.
- Australian Commodity Traders Exchange
- Orica Mining Services - Indonesia
- Samtan Co., Ltd - South Korea
- MS Steel International - UAE
- Sinarmas Energy and Mining - Indonesia
- Meralco Power Generation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Semirara Mining Corp, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- GMR Energy Limited - India
- Iligan Light & Power Inc, Philippines
- TeaM Sual Corporation - Philippines
- Maharashtra Electricity Regulatory Commission - India
- Mjunction Services Limited - India
- Port Waratah Coal Services - Australia
- Altura Mining Limited, Indonesia
- Krishnapatnam Port Company Ltd. - India
- Metalloyd Limited - United Kingdom
- Singapore Mercantile Exchange
- Indo Tambangraya Megah - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Globalindo Alam Lestari - Indonesia
- Vizag Seaport Private Limited - India
- Eastern Coal Council - USA
- Global Business Power Corporation, Philippines
- Dalmia Cement Bharat India
- Indika Energy - Indonesia
- Interocean Group of Companies - India
- Lanco Infratech Ltd - India
- SN Aboitiz Power Inc, Philippines
- Maheswari Brothers Coal Limited - India
- Indian Oil Corporation Limited
- Siam City Cement PLC, Thailand
- Mintek Dendrill Indonesia
- Mercator Lines Limited - India
- Antam Resourcindo - Indonesia
- Grasim Industreis Ltd - India
- Chettinad Cement Corporation Ltd - India
- Australian Coal Association
- Neyveli Lignite Corporation Ltd, - India
- Kalimantan Lumbung Energi - Indonesia
- Attock Cement Pakistan Limited
- Thiess Contractors Indonesia
- Global Green Power PLC Corporation, Philippines
- Petron Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- Timah Investasi Mineral - Indoneisa
- VISA Power Limited - India
- Coalindo Energy - Indonesia
- Bangladesh Power Developement Board
- New Zealand Coal & Carbon
- Simpson Spence & Young - Indonesia
- Makarim & Taira - Indonesia
- Barasentosa Lestari - Indonesia
- Kumho Petrochemical, South Korea
- Wood Mackenzie - Singapore
- IEA Clean Coal Centre - UK
- Medco Energi Mining Internasional
- Africa Commodities Group - South Africa
- Planning Commission, India
- Formosa Plastics Group - Taiwan
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- San Jose City I Power Corp, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Malabar Cements Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Miang Besar Coal Terminal - Indonesia
- Minerals Council of Australia
- Baramulti Group, Indonesia
- Rio Tinto Coal - Australia
- Cement Manufacturers Association - India
- Essar Steel Hazira Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Deloitte Consulting - India
- Power Finance Corporation Ltd., India
- Therma Luzon, Inc, Philippines
- Parry Sugars Refinery, India
- Petrochimia International Co. Ltd.- Taiwan
- Riau Bara Harum - Indonesia
- London Commodity Brokers - England
- Ind-Barath Power Infra Limited - India
- Trasteel International SA, Italy
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Agrawal Coal Company - India
- SMG Consultants - Indonesia
- Energy Development Corp, Philippines
- Marubeni Corporation - India
- Parliament of New Zealand
- Alfred C Toepfer International GmbH - Germany
- Oldendorff Carriers - Singapore
- Banpu Public Company Limited - Thailand
- Sindya Power Generating Company Private Ltd
- Tata Chemicals Ltd - India
- CNBM International Corporation - China
- ICICI Bank Limited - India
- Aboitiz Power Corporation - Philippines
- Sical Logistics Limited - India
- Heidelberg Cement - Germany
- Semirara Mining and Power Corporation, Philippines
- Standard Chartered Bank - UAE
- AsiaOL BioFuels Corp., Philippines
- PNOC Exploration Corporation - Philippines
- International Coal Ventures Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- Price Waterhouse Coopers - Russia
- Borneo Indobara - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Siam City Cement - Thailand
- Savvy Resources Ltd - HongKong
|
| |
| |
|
