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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, 11 April 23
OIL RISES ON CHINA STIMULUS EXPECTATIONS, WEAKER DOLLAR - REUTERS
Oil prices rose on Tuesday on expectations of potential economic stimulus by China, healthy demand in the rest of Asia and a drop in U.S. crude sto ...
Sunday, 09 April 23
CHINA’S BUSINESS INCOME REBOUND POINTS TO IMPROVING ECONOMY: OFFICIAL - XINHUA
Chinese businesses have posted a strong rebound in sales revenue since the beginning of this year in the latest signal of an improving economy.
...
Sunday, 09 April 23
COAL INDIA TO BOOST SUPPLIES TO INDUSTRIES AS UTILITIES’ INVENTORIES RISE - REUTERS
Coal India Ltd will increase supplies to industries, the world’s largest coal miner said on Wednesday as fuel inventories at utilities run by ...
Thursday, 06 April 23
MARKET INSIGHT - INTERMODAL
LNG Current Supply/Demand Dynamics
This year, LNG supply will likely exceed demand, so prices will need to decline to levels that will encourag ...
Sunday, 26 March 23
EUROPE’S RUSH TO LNG COULD TURN INTO 'WORLD’S MOST EXPENSIVE AND UNNECESSARY INSURANCE POLICY'- CNBC
Europe’s rapid buildout of liquefied natural gas infrastructure is on track to far exceed demand by the end of the decade, according to new r ...
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Showing 111 to 115 news of total 6871 |
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- Coastal Gujarat Power Limited - India
- Vizag Seaport Private Limited - India
- Larsen & Toubro Limited - India
- Baramulti Group, Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Kideco Jaya Agung - Indonesia
- Singapore Mercantile Exchange
- Bayan Resources Tbk. - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Barasentosa Lestari - Indonesia
- Latin American Coal - Colombia
- IHS Mccloskey Coal Group - USA
- Indogreen Group - Indonesia
- The Treasury - Australian Government
- Siam City Cement PLC, Thailand
- Electricity Generating Authority of Thailand
- White Energy Company Limited
- Leighton Contractors Pty Ltd - Australia
- Medco Energi Mining Internasional
- TNB Fuel Sdn Bhd - Malaysia
- Sindya Power Generating Company Private Ltd
- Goldman Sachs - Singapore
- Attock Cement Pakistan Limited
- Power Finance Corporation Ltd., India
- Therma Luzon, Inc, Philippines
- San Jose City I Power Corp, Philippines
- Samtan Co., Ltd - South Korea
- Global Business Power Corporation, Philippines
- Kapuas Tunggal Persada - Indonesia
- International Coal Ventures Pvt Ltd - India
- Energy Link Ltd, New Zealand
- Merrill Lynch Commodities Europe
- Jaiprakash Power Ventures ltd
- GAC Shipping (India) Pvt Ltd
- Videocon Industries ltd - India
- Mintek Dendrill Indonesia
- Carbofer General Trading SA - India
- Agrawal Coal Company - India
- Mjunction Services Limited - India
- Sarangani Energy Corporation, Philippines
- Bharathi Cement Corporation - India
- Aditya Birla Group - India
- Malabar Cements Ltd - India
- Australian Coal Association
- Eastern Coal Council - USA
- CIMB Investment Bank - Malaysia
- Iligan Light & Power Inc, Philippines
- Mercator Lines Limited - India
- Thiess Contractors Indonesia
- Central Electricity Authority - India
- Xindia Steels Limited - India
- Ministry of Finance - Indonesia
- Semirara Mining Corp, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- OPG Power Generation Pvt Ltd - India
- Wood Mackenzie - Singapore
- Coal and Oil Company - UAE
- Dalmia Cement Bharat India
- VISA Power Limited - India
- Kartika Selabumi Mining - Indonesia
- Oldendorff Carriers - Singapore
- Tata Chemicals Ltd - India
- Minerals Council of Australia
- European Bulk Services B.V. - Netherlands
- Global Coal Blending Company Limited - Australia
- Bahari Cakrawala Sebuku - Indonesia
- Chettinad Cement Corporation Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Indika Energy - Indonesia
- Africa Commodities Group - South Africa
- SMG Consultants - Indonesia
- Coalindo Energy - Indonesia
- ASAPP Information Group - India
- Wilmar Investment Holdings
- Thai Mozambique Logistica
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- SMC Global Power, Philippines
- India Bulls Power Limited - India
- Simpson Spence & Young - Indonesia
- Kaltim Prima Coal - Indonesia
- Borneo Indobara - Indonesia
- Edison Trading Spa - Italy
- Vijayanagar Sugar Pvt Ltd - India
- Planning Commission, India
- Maharashtra Electricity Regulatory Commission - India
- Banpu Public Company Limited - Thailand
- Parry Sugars Refinery, India
- Orica Australia Pty. Ltd.
- Lanco Infratech Ltd - India
- Marubeni Corporation - India
- The University of Queensland
- Miang Besar Coal Terminal - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Central Java Power - Indonesia
- Indian Energy Exchange, India
- Sinarmas Energy and Mining - Indonesia
- Madhucon Powers Ltd - India
- Karaikal Port Pvt Ltd - India
- Sree Jayajothi Cements Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Interocean Group of Companies - India
- Sakthi Sugars Limited - India
- Ministry of Mines - Canada
- Alfred C Toepfer International GmbH - Germany
- Pipit Mutiara Jaya. PT, Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Ind-Barath Power Infra Limited - India
- ICICI Bank Limited - India
- Sical Logistics Limited - India
- Meenaskhi Energy Private Limited - India
- Directorate Of Revenue Intelligence - India
- PowerSource Philippines DevCo
- Bukit Makmur.PT - Indonesia
- Chamber of Mines of South Africa
- Straits Asia Resources Limited - Singapore
- Essar Steel Hazira Ltd - India
- Kepco SPC Power Corporation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ministry of Transport, Egypt
- Metalloyd Limited - United Kingdom
- Price Waterhouse Coopers - Russia
- Bulk Trading Sa - Switzerland
- Formosa Plastics Group - Taiwan
- Ceylon Electricity Board - Sri Lanka
- Eastern Energy - Thailand
- Kalimantan Lumbung Energi - Indonesia
- Sojitz Corporation - Japan
- Manunggal Multi Energi - Indonesia
- Aboitiz Power Corporation - Philippines
- Indo Tambangraya Megah - Indonesia
- Gujarat Sidhee Cement - India
- Intertek Mineral Services - Indonesia
- Georgia Ports Authority, United States
- Bukit Asam (Persero) Tbk - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Semirara Mining and Power Corporation, Philippines
- GMR Energy Limited - India
- Petron Corporation, Philippines
- McConnell Dowell - Australia
- Kumho Petrochemical, South Korea
- Rashtriya Ispat Nigam Limited - India
- Parliament of New Zealand
- Kobexindo Tractors - Indoneisa
- Deloitte Consulting - India
- IEA Clean Coal Centre - UK
- MS Steel International - UAE
- Romanian Commodities Exchange
- Neyveli Lignite Corporation Ltd, - India
- Port Waratah Coal Services - Australia
- Bhatia International Limited - India
- Bangladesh Power Developement Board
- Trasteel International SA, Italy
- Bhushan Steel Limited - India
- Siam City Cement - Thailand
- Australian Commodity Traders Exchange
- The State Trading Corporation of India Ltd
- Heidelberg Cement - Germany
- AsiaOL BioFuels Corp., Philippines
- PTC India Limited - India
- GVK Power & Infra Limited - India
- Mercuria Energy - Indonesia
- Meralco Power Generation, Philippines
- Maheswari Brothers Coal Limited - India
- Renaissance Capital - South Africa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Economic Council, Georgia
- Orica Mining Services - Indonesia
- TeaM Sual Corporation - Philippines
- Indonesian Coal Mining Association
- Anglo American - United Kingdom
- South Luzon Thermal Energy Corporation
- Ambuja Cements Ltd - India
- LBH Netherlands Bv - Netherlands
- Energy Development Corp, Philippines
- Vedanta Resources Plc - India
- Toyota Tsusho Corporation, Japan
- Riau Bara Harum - Indonesia
- New Zealand Coal & Carbon
- Binh Thuan Hamico - Vietnam
- Rio Tinto Coal - Australia
- Jindal Steel & Power Ltd - India
- Star Paper Mills Limited - India
- Pendopo Energi Batubara - Indonesia
- Grasim Industreis Ltd - India
- Antam Resourcindo - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Makarim & Taira - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Bukit Baiduri Energy - Indonesia
- Indian Oil Corporation Limited
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- London Commodity Brokers - England
- CNBM International Corporation - China
- Global Green Power PLC Corporation, Philippines
- Standard Chartered Bank - UAE
- SN Aboitiz Power Inc, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Posco Energy - South Korea
- Savvy Resources Ltd - HongKong
- Petrochimia International Co. Ltd.- Taiwan
- Timah Investasi Mineral - Indoneisa
- Electricity Authority, New Zealand
- Altura Mining Limited, Indonesia
- Independent Power Producers Association of India
- Cement Manufacturers Association - India
- Holcim Trading Pte Ltd - Singapore
- Bhoruka Overseas - Indonesia
- Commonwealth Bank - Australia
- PNOC Exploration Corporation - Philippines
- GN Power Mariveles Coal Plant, Philippines
- Uttam Galva Steels Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Tamil Nadu electricity Board
- Salva Resources Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
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