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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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Tuesday, 23 May 23
INDIA: COAL OUTPUT UP 8.9%, SUPPLY RISES 11.7% IN APRIL - FINANCIAL EXPRESS
India’s coal production jumped 8.85% to 73.14 million tonne (MT) in April 2023 and the total coal despatch during the month went up 11.66% to ...
Tuesday, 23 May 23
CHINA COAL OUTPUT UP 4.5 PCT IN APRIL - XINHUA
China’s raw coal output posted stable expansion in April, official data showed.
The country produced 380 million tonnes of raw ...
Saturday, 20 May 23
NON-OPEC OIL SUPPLY DEVELOPMENT - OPEC
In 2022, non-OPEC supply is estimated to have increased by 1.9 mb/d y-o-y. Out of this, US liquids production increased by 1.2 mb/d, mainly on the ...
Saturday, 20 May 23
GLOBAL COAL TRADE HAS REALLY PICKED UP PACE IN RECENT MONTHS, NOW FULLY BACK TO PRE-COVID LEVELS - BANCHERO COSTA
Global coal trade has really picked up pace in recent months, and is now fully back to pre-Covid levels. In Jan-Apr 2023, total global seaborne coa ...
Saturday, 20 May 23
MARKET INSIGHT - INTERMODAL
India is one of the world's largest coal producers and one of the world's largest importers of coal. The country uses coal mainly for power ...
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Showing 101 to 105 news of total 6871 |
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- Sindya Power Generating Company Private Ltd
- Coal and Oil Company - UAE
- Pendopo Energi Batubara - Indonesia
- Romanian Commodities Exchange
- Gujarat Mineral Development Corp Ltd - India
- Price Waterhouse Coopers - Russia
- Thai Mozambique Logistica
- Bahari Cakrawala Sebuku - Indonesia
- Coastal Gujarat Power Limited - India
- Rio Tinto Coal - Australia
- Essar Steel Hazira Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- San Jose City I Power Corp, Philippines
- Straits Asia Resources Limited - Singapore
- Holcim Trading Pte Ltd - Singapore
- PetroVietnam Power Coal Import and Supply Company
- Attock Cement Pakistan Limited
- Energy Development Corp, Philippines
- Ceylon Electricity Board - Sri Lanka
- Kideco Jaya Agung - Indonesia
- PTC India Limited - India
- MS Steel International - UAE
- Xindia Steels Limited - India
- Bhushan Steel Limited - India
- Maheswari Brothers Coal Limited - India
- Baramulti Group, Indonesia
- Economic Council, Georgia
- Star Paper Mills Limited - India
- Mercuria Energy - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Iligan Light & Power Inc, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Power Finance Corporation Ltd., India
- Timah Investasi Mineral - Indoneisa
- Bulk Trading Sa - Switzerland
- Siam City Cement PLC, Thailand
- Kumho Petrochemical, South Korea
- Globalindo Alam Lestari - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- European Bulk Services B.V. - Netherlands
- AsiaOL BioFuels Corp., Philippines
- GAC Shipping (India) Pvt Ltd
- Borneo Indobara - Indonesia
- Directorate Of Revenue Intelligence - India
- Bukit Makmur.PT - Indonesia
- Central Java Power - Indonesia
- Latin American Coal - Colombia
- Ind-Barath Power Infra Limited - India
- Grasim Industreis Ltd - India
- Makarim & Taira - Indonesia
- Barasentosa Lestari - Indonesia
- Binh Thuan Hamico - Vietnam
- Samtan Co., Ltd - South Korea
- Global Green Power PLC Corporation, Philippines
- Mintek Dendrill Indonesia
- Edison Trading Spa - Italy
- Renaissance Capital - South Africa
- Cement Manufacturers Association - India
- Sakthi Sugars Limited - India
- Kaltim Prima Coal - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Posco Energy - South Korea
- Gujarat Electricity Regulatory Commission - India
- TNB Fuel Sdn Bhd - Malaysia
- Metalloyd Limited - United Kingdom
- Lanco Infratech Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Jaiprakash Power Ventures ltd
- Madhucon Powers Ltd - India
- Karaikal Port Pvt Ltd - India
- Trasteel International SA, Italy
- Directorate General of MIneral and Coal - Indonesia
- Siam City Cement - Thailand
- Neyveli Lignite Corporation Ltd, - India
- The State Trading Corporation of India Ltd
- GVK Power & Infra Limited - India
- Meenaskhi Energy Private Limited - India
- Bhatia International Limited - India
- Interocean Group of Companies - India
- Toyota Tsusho Corporation, Japan
- Parliament of New Zealand
- Gujarat Sidhee Cement - India
- Savvy Resources Ltd - HongKong
- Bangladesh Power Developement Board
- Billiton Holdings Pty Ltd - Australia
- Wood Mackenzie - Singapore
- Africa Commodities Group - South Africa
- Planning Commission, India
- Tamil Nadu electricity Board
- Cigading International Bulk Terminal - Indonesia
- Australian Commodity Traders Exchange
- South Luzon Thermal Energy Corporation
- Australian Coal Association
- Kobexindo Tractors - Indoneisa
- Vedanta Resources Plc - India
- Meralco Power Generation, Philippines
- Deloitte Consulting - India
- Leighton Contractors Pty Ltd - Australia
- Kepco SPC Power Corporation, Philippines
- ASAPP Information Group - India
- ICICI Bank Limited - India
- Energy Link Ltd, New Zealand
- Manunggal Multi Energi - Indonesia
- Altura Mining Limited, Indonesia
- London Commodity Brokers - England
- Aboitiz Power Corporation - Philippines
- Sojitz Corporation - Japan
- Commonwealth Bank - Australia
- Chamber of Mines of South Africa
- CNBM International Corporation - China
- Medco Energi Mining Internasional
- Sical Logistics Limited - India
- VISA Power Limited - India
- International Coal Ventures Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Standard Chartered Bank - UAE
- Oldendorff Carriers - Singapore
- Carbofer General Trading SA - India
- Bayan Resources Tbk. - Indonesia
- Indian Oil Corporation Limited
- Anglo American - United Kingdom
- Global Business Power Corporation, Philippines
- PowerSource Philippines DevCo
- Indian Energy Exchange, India
- Mjunction Services Limited - India
- Electricity Generating Authority of Thailand
- Videocon Industries ltd - India
- Georgia Ports Authority, United States
- Intertek Mineral Services - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Petrochimia International Co. Ltd.- Taiwan
- Kalimantan Lumbung Energi - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- PNOC Exploration Corporation - Philippines
- Bhoruka Overseas - Indonesia
- TeaM Sual Corporation - Philippines
- Kapuas Tunggal Persada - Indonesia
- CIMB Investment Bank - Malaysia
- LBH Netherlands Bv - Netherlands
- Marubeni Corporation - India
- Simpson Spence & Young - Indonesia
- SMC Global Power, Philippines
- Minerals Council of Australia
- Heidelberg Cement - Germany
- Formosa Plastics Group - Taiwan
- Goldman Sachs - Singapore
- Dalmia Cement Bharat India
- SMG Consultants - Indonesia
- Ambuja Cements Ltd - India
- Global Coal Blending Company Limited - Australia
- Petron Corporation, Philippines
- Bharathi Cement Corporation - India
- OPG Power Generation Pvt Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Parry Sugars Refinery, India
- Jorong Barutama Greston.PT - Indonesia
- Kartika Selabumi Mining - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- IHS Mccloskey Coal Group - USA
- Semirara Mining and Power Corporation, Philippines
- Riau Bara Harum - Indonesia
- Malabar Cements Ltd - India
- Bukit Baiduri Energy - Indonesia
- Antam Resourcindo - Indonesia
- Tata Chemicals Ltd - India
- Therma Luzon, Inc, Philippines
- Salva Resources Pvt Ltd - India
- Aditya Birla Group - India
- Agrawal Coal Company - India
- GMR Energy Limited - India
- Indogreen Group - Indonesia
- SN Aboitiz Power Inc, Philippines
- India Bulls Power Limited - India
- Sarangani Energy Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- Krishnapatnam Port Company Ltd. - India
- Sinarmas Energy and Mining - Indonesia
- Thiess Contractors Indonesia
- Electricity Authority, New Zealand
- Ministry of Finance - Indonesia
- Ministry of Mines - Canada
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- New Zealand Coal & Carbon
- Singapore Mercantile Exchange
- Merrill Lynch Commodities Europe
- Eastern Coal Council - USA
- Chettinad Cement Corporation Ltd - India
- Banpu Public Company Limited - Thailand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Wilmar Investment Holdings
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Indo Tambangraya Megah - Indonesia
- White Energy Company Limited
- Bukit Asam (Persero) Tbk - Indonesia
- IEA Clean Coal Centre - UK
- Ministry of Transport, Egypt
- Central Electricity Authority - India
- McConnell Dowell - Australia
- Jindal Steel & Power Ltd - India
- Larsen & Toubro Limited - India
- Miang Besar Coal Terminal - Indonesia
- Independent Power Producers Association of India
- Vizag Seaport Private Limited - India
- The Treasury - Australian Government
- Indika Energy - Indonesia
- Uttam Galva Steels Limited - India
- Orica Australia Pty. Ltd.
- Sree Jayajothi Cements Limited - India
- Orica Mining Services - Indonesia
- Coalindo Energy - Indonesia
- Mercator Lines Limited - India
- Indonesian Coal Mining Association
- Eastern Energy - Thailand
- Port Waratah Coal Services - Australia
- The University of Queensland
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