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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, 12 June 24
CHINA ACCOUNTS FOR 16.3% OF AUSTRALIA'S COAL EXPORTS, FOLLOWED BY INDIA 14.4% - BANCHERO COSTA
Global coal trade has really picked up pace in recent months, and is now fully back to pre-Covid levels says Banchero Costa in its latest report.
...
Wednesday, 12 June 24
LNG NEWBUILDING VALUES AT RECORD HIGH: 78 NEWBUILD ORDERS PLACED IN 2024, DOUBLING 2023 - VESON NAUTICAL
The number of LNG newbuilding orders have more than doubled from the same period last year where 34 orders were placed, compared to 78 in the first ...
Monday, 10 June 24
CHINA'S MAY COAL IMPORTS RISE 11% ON LOWER DOMESTIC OUTPUT - REUTERS
China’s imports of coal rose 11% in May from a year earlier, customs data and Reuters records showed on Friday, as lower domestic output this ...
Tuesday, 04 June 24
HOW DO WESTERN SANCTIONS ON RUSSIA IMPACT THE GLOBAL METALS, MINING AND COAL MARKETS - WOOD MACKENZIE
The geopolitical landscape for Russia, as a major supplier of various commodities, has undergone a dramatic transformation since the invasion of Uk ...
Friday, 22 March 24
CASE STUDY: DANGERS OF COAL CARGO - SKULD
Recently, a bulk cargo vessel carrying coal from South Africa to Singapore suffered a fatal accident, resulting in the deaths of three crew members ...
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Showing 21 to 25 news of total 6871 |
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- Videocon Industries ltd - India
- Global Coal Blending Company Limited - Australia
- Marubeni Corporation - India
- Africa Commodities Group - South Africa
- Bhatia International Limited - India
- Aditya Birla Group - India
- Directorate General of MIneral and Coal - Indonesia
- Eastern Coal Council - USA
- Power Finance Corporation Ltd., India
- McConnell Dowell - Australia
- Agrawal Coal Company - India
- Toyota Tsusho Corporation, Japan
- Interocean Group of Companies - India
- Mercuria Energy - Indonesia
- Jindal Steel & Power Ltd - India
- Latin American Coal - Colombia
- Posco Energy - South Korea
- Savvy Resources Ltd - HongKong
- Madhucon Powers Ltd - India
- Planning Commission, India
- San Jose City I Power Corp, Philippines
- Bangladesh Power Developement Board
- Kartika Selabumi Mining - Indonesia
- The University of Queensland
- SMG Consultants - Indonesia
- Bhoruka Overseas - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Sarangani Energy Corporation, Philippines
- Ambuja Cements Ltd - India
- Wood Mackenzie - Singapore
- Baramulti Group, Indonesia
- Straits Asia Resources Limited - Singapore
- Ministry of Transport, Egypt
- Electricity Authority, New Zealand
- Rashtriya Ispat Nigam Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Renaissance Capital - South Africa
- Ceylon Electricity Board - Sri Lanka
- Economic Council, Georgia
- Indo Tambangraya Megah - Indonesia
- Siam City Cement - Thailand
- Iligan Light & Power Inc, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Goldman Sachs - Singapore
- Tamil Nadu electricity Board
- Ministry of Finance - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Energy Development Corp, Philippines
- Coastal Gujarat Power Limited - India
- Mjunction Services Limited - India
- Bulk Trading Sa - Switzerland
- Bahari Cakrawala Sebuku - Indonesia
- Aboitiz Power Corporation - Philippines
- Borneo Indobara - Indonesia
- Singapore Mercantile Exchange
- Lanco Infratech Ltd - India
- Manunggal Multi Energi - Indonesia
- ASAPP Information Group - India
- Parliament of New Zealand
- Therma Luzon, Inc, Philippines
- Oldendorff Carriers - Singapore
- Uttam Galva Steels Limited - India
- Orica Mining Services - Indonesia
- PowerSource Philippines DevCo
- Holcim Trading Pte Ltd - Singapore
- Jaiprakash Power Ventures ltd
- OPG Power Generation Pvt Ltd - India
- Edison Trading Spa - Italy
- MS Steel International - UAE
- IEA Clean Coal Centre - UK
- Intertek Mineral Services - Indonesia
- Central Electricity Authority - India
- Vijayanagar Sugar Pvt Ltd - India
- Kepco SPC Power Corporation, Philippines
- Kapuas Tunggal Persada - Indonesia
- SN Aboitiz Power Inc, Philippines
- VISA Power Limited - India
- Attock Cement Pakistan Limited
- Indian Oil Corporation Limited
- Timah Investasi Mineral - Indoneisa
- Petrochimia International Co. Ltd.- Taiwan
- Gujarat Mineral Development Corp Ltd - India
- Dalmia Cement Bharat India
- Bhushan Steel Limited - India
- PTC India Limited - India
- Sakthi Sugars Limited - India
- Georgia Ports Authority, United States
- LBH Netherlands Bv - Netherlands
- CIMB Investment Bank - Malaysia
- Price Waterhouse Coopers - Russia
- Pendopo Energi Batubara - Indonesia
- Indian Energy Exchange, India
- Essar Steel Hazira Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Australian Commodity Traders Exchange
- Alfred C Toepfer International GmbH - Germany
- Kohat Cement Company Ltd. - Pakistan
- Indika Energy - Indonesia
- Commonwealth Bank - Australia
- GVK Power & Infra Limited - India
- Chettinad Cement Corporation Ltd - India
- Directorate Of Revenue Intelligence - India
- Gujarat Sidhee Cement - India
- India Bulls Power Limited - India
- The State Trading Corporation of India Ltd
- AsiaOL BioFuels Corp., Philippines
- Indogreen Group - Indonesia
- Formosa Plastics Group - Taiwan
- Metalloyd Limited - United Kingdom
- Mercator Lines Limited - India
- Binh Thuan Hamico - Vietnam
- ICICI Bank Limited - India
- Medco Energi Mining Internasional
- Vedanta Resources Plc - India
- Central Java Power - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Standard Chartered Bank - UAE
- Port Waratah Coal Services - Australia
- Leighton Contractors Pty Ltd - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- GMR Energy Limited - India
- Merrill Lynch Commodities Europe
- Rio Tinto Coal - Australia
- Sindya Power Generating Company Private Ltd
- Gujarat Electricity Regulatory Commission - India
- Semirara Mining and Power Corporation, Philippines
- Semirara Mining Corp, Philippines
- CNBM International Corporation - China
- Global Business Power Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- GAC Shipping (India) Pvt Ltd
- Samtan Co., Ltd - South Korea
- IHS Mccloskey Coal Group - USA
- Coal and Oil Company - UAE
- Orica Australia Pty. Ltd.
- Meralco Power Generation, Philippines
- Minerals Council of Australia
- Bharathi Cement Corporation - India
- Eastern Energy - Thailand
- Sical Logistics Limited - India
- Anglo American - United Kingdom
- International Coal Ventures Pvt Ltd - India
- Thai Mozambique Logistica
- Chamber of Mines of South Africa
- Romanian Commodities Exchange
- London Commodity Brokers - England
- Indonesian Coal Mining Association
- Australian Coal Association
- Bukit Baiduri Energy - Indonesia
- Energy Link Ltd, New Zealand
- Banpu Public Company Limited - Thailand
- Coalindo Energy - Indonesia
- Kobexindo Tractors - Indoneisa
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bayan Resources Tbk. - Indonesia
- Antam Resourcindo - Indonesia
- Vizag Seaport Private Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Karaikal Port Pvt Ltd - India
- Kumho Petrochemical, South Korea
- Krishnapatnam Port Company Ltd. - India
- Grasim Industreis Ltd - India
- Xindia Steels Limited - India
- Trasteel International SA, Italy
- Bukit Asam (Persero) Tbk - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Heidelberg Cement - Germany
- Tata Chemicals Ltd - India
- Mintek Dendrill Indonesia
- Parry Sugars Refinery, India
- Riau Bara Harum - Indonesia
- Larsen & Toubro Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Simpson Spence & Young - Indonesia
- Sree Jayajothi Cements Limited - India
- European Bulk Services B.V. - Netherlands
- Ministry of Mines - Canada
- White Energy Company Limited
- PNOC Exploration Corporation - Philippines
- Kideco Jaya Agung - Indonesia
- Maheswari Brothers Coal Limited - India
- Petron Corporation, Philippines
- Globalindo Alam Lestari - Indonesia
- Electricity Generating Authority of Thailand
- Karbindo Abesyapradhi - Indoneisa
- Neyveli Lignite Corporation Ltd, - India
- TNB Fuel Sdn Bhd - Malaysia
- TeaM Sual Corporation - Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- SMC Global Power, Philippines
- Salva Resources Pvt Ltd - India
- Ind-Barath Power Infra Limited - India
- Miang Besar Coal Terminal - Indonesia
- Makarim & Taira - Indonesia
- Independent Power Producers Association of India
- Global Green Power PLC Corporation, Philippines
- Wilmar Investment Holdings
- Deloitte Consulting - India
- The Treasury - Australian Government
- New Zealand Coal & Carbon
- Carbofer General Trading SA - India
- Malabar Cements Ltd - India
- South Luzon Thermal Energy Corporation
- Altura Mining Limited, Indonesia
- Bukit Makmur.PT - Indonesia
- Kaltim Prima Coal - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Meenaskhi Energy Private Limited - India
- Sojitz Corporation - Japan
- Star Paper Mills Limited - India
- Siam City Cement PLC, Thailand
- Billiton Holdings Pty Ltd - Australia
- Cigading International Bulk Terminal - Indonesia
- Barasentosa Lestari - Indonesia
- Thiess Contractors Indonesia
- Cement Manufacturers Association - India
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