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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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Friday, 23 February 24
STRONG OUTLOOK FOR THE TANKER MARKET IN 2024 AND BEYOND - DNV
Several factors have aligned over the past two years to create a robust and profitable market for tanker owners, which is expected to drive newbuil ...
Friday, 23 February 24
AUSTRALIAN COAL FLOWS TO ASIA HOVER ABOVE LAST YEAR’S VOLUME TONNES - SIGNAL GROUP
In the final days of February, the dry bulk freight market appeared to maintain a relatively stable momentum, particularly evident in the large ves ...
Friday, 23 February 24
RUSSIAN COAL SHIPMENTS FALL 14% AS SANCTIONS BITE - BIMCO
During the first seven weeks of 2024, Russian coal shipments have fallen 14% y/y. Volumes have gradually declined since October 2023 when logistica ...
Thursday, 22 February 24
BIMCO PUBLISHES SHIP FINANCING FORMS TO ENSURE UNINTERRUPTED USE OF SHIPS
BIMCO has published two standard Quiet Enjoyment Letters (QELs), the first standard form QELs available to the industry, to offer a tool that can e ...
Monday, 19 February 24
METALS INVESTMENT: THE DARKEST HOUR IS JUST BEFORE THE DAWN - WOOD MACKENZIE
Things often seem at their worst just before they get better. In terms of meeting our net zero 2050 scenario, we’ve reached a watershed momen ...
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Showing 31 to 35 news of total 6871 |
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- Thai Mozambique Logistica
- Gujarat Sidhee Cement - India
- GMR Energy Limited - India
- Sarangani Energy Corporation, Philippines
- Global Green Power PLC Corporation, Philippines
- Australian Coal Association
- Kumho Petrochemical, South Korea
- Sinarmas Energy and Mining - Indonesia
- Ambuja Cements Ltd - India
- European Bulk Services B.V. - Netherlands
- Alfred C Toepfer International GmbH - Germany
- Bhushan Steel Limited - India
- Attock Cement Pakistan Limited
- Wood Mackenzie - Singapore
- Krishnapatnam Port Company Ltd. - India
- Formosa Plastics Group - Taiwan
- Aboitiz Power Corporation - Philippines
- Bangladesh Power Developement Board
- Indian Energy Exchange, India
- Economic Council, Georgia
- Cigading International Bulk Terminal - Indonesia
- Therma Luzon, Inc, Philippines
- White Energy Company Limited
- Georgia Ports Authority, United States
- IHS Mccloskey Coal Group - USA
- Ministry of Mines - Canada
- Wilmar Investment Holdings
- Siam City Cement - Thailand
- Sical Logistics Limited - India
- Rashtriya Ispat Nigam Limited - India
- Orica Australia Pty. Ltd.
- Bharathi Cement Corporation - India
- Altura Mining Limited, Indonesia
- Rio Tinto Coal - Australia
- IEA Clean Coal Centre - UK
- Directorate General of MIneral and Coal - Indonesia
- Star Paper Mills Limited - India
- Kepco SPC Power Corporation, Philippines
- India Bulls Power Limited - India
- Merrill Lynch Commodities Europe
- Baramulti Group, Indonesia
- LBH Netherlands Bv - Netherlands
- Sakthi Sugars Limited - India
- Mercuria Energy - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Bukit Baiduri Energy - Indonesia
- Madhucon Powers Ltd - India
- CNBM International Corporation - China
- Intertek Mineral Services - Indonesia
- Simpson Spence & Young - Indonesia
- Cement Manufacturers Association - India
- Africa Commodities Group - South Africa
- Medco Energi Mining Internasional
- Lanco Infratech Ltd - India
- Semirara Mining Corp, Philippines
- Port Waratah Coal Services - Australia
- VISA Power Limited - India
- PowerSource Philippines DevCo
- Minerals Council of Australia
- ICICI Bank Limited - India
- Indika Energy - Indonesia
- Vizag Seaport Private Limited - India
- Pendopo Energi Batubara - Indonesia
- Orica Mining Services - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Thiess Contractors Indonesia
- SMC Global Power, Philippines
- Karaikal Port Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Meralco Power Generation, Philippines
- Indonesian Coal Mining Association
- Timah Investasi Mineral - Indoneisa
- Planning Commission, India
- Australian Commodity Traders Exchange
- Energy Link Ltd, New Zealand
- Eastern Coal Council - USA
- PTC India Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Chamber of Mines of South Africa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Meenaskhi Energy Private Limited - India
- Global Coal Blending Company Limited - Australia
- Eastern Energy - Thailand
- Malabar Cements Ltd - India
- Parry Sugars Refinery, India
- Electricity Generating Authority of Thailand
- Maharashtra Electricity Regulatory Commission - India
- Borneo Indobara - Indonesia
- TeaM Sual Corporation - Philippines
- Makarim & Taira - Indonesia
- Latin American Coal - Colombia
- Sojitz Corporation - Japan
- Anglo American - United Kingdom
- Bukit Asam (Persero) Tbk - Indonesia
- Deloitte Consulting - India
- International Coal Ventures Pvt Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Essar Steel Hazira Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Sindya Power Generating Company Private Ltd
- Grasim Industreis Ltd - India
- Aditya Birla Group - India
- Chettinad Cement Corporation Ltd - India
- Kartika Selabumi Mining - Indonesia
- The Treasury - Australian Government
- Renaissance Capital - South Africa
- Romanian Commodities Exchange
- Kideco Jaya Agung - Indonesia
- Indogreen Group - Indonesia
- Commonwealth Bank - Australia
- Bahari Cakrawala Sebuku - Indonesia
- Sree Jayajothi Cements Limited - India
- Ministry of Finance - Indonesia
- Posco Energy - South Korea
- Petron Corporation, Philippines
- OPG Power Generation Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Oldendorff Carriers - Singapore
- Globalindo Alam Lestari - Indonesia
- PNOC Exploration Corporation - Philippines
- Barasentosa Lestari - Indonesia
- Binh Thuan Hamico - Vietnam
- Kaltim Prima Coal - Indonesia
- Maheswari Brothers Coal Limited - India
- Straits Asia Resources Limited - Singapore
- Jaiprakash Power Ventures ltd
- Mercator Lines Limited - India
- Iligan Light & Power Inc, Philippines
- Electricity Authority, New Zealand
- Central Electricity Authority - India
- Tata Chemicals Ltd - India
- Singapore Mercantile Exchange
- Parliament of New Zealand
- Jindal Steel & Power Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Antam Resourcindo - Indonesia
- Bhatia International Limited - India
- Price Waterhouse Coopers - Russia
- Banpu Public Company Limited - Thailand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Marubeni Corporation - India
- Interocean Group of Companies - India
- Salva Resources Pvt Ltd - India
- Videocon Industries ltd - India
- Standard Chartered Bank - UAE
- Tamil Nadu electricity Board
- Coastal Gujarat Power Limited - India
- Dalmia Cement Bharat India
- Goldman Sachs - Singapore
- ASAPP Information Group - India
- Bulk Trading Sa - Switzerland
- The State Trading Corporation of India Ltd
- Savvy Resources Ltd - HongKong
- Semirara Mining and Power Corporation, Philippines
- Vedanta Resources Plc - India
- Riau Bara Harum - Indonesia
- Xindia Steels Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Agrawal Coal Company - India
- Directorate Of Revenue Intelligence - India
- Mjunction Services Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Edison Trading Spa - Italy
- Power Finance Corporation Ltd., India
- Larsen & Toubro Limited - India
- Ceylon Electricity Board - Sri Lanka
- GVK Power & Infra Limited - India
- Bhoruka Overseas - Indonesia
- GAC Shipping (India) Pvt Ltd
- Kobexindo Tractors - Indoneisa
- Central Java Power - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- South Luzon Thermal Energy Corporation
- Metalloyd Limited - United Kingdom
- Neyveli Lignite Corporation Ltd, - India
- SMG Consultants - Indonesia
- MS Steel International - UAE
- Trasteel International SA, Italy
- Coalindo Energy - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- London Commodity Brokers - England
- Heidelberg Cement - Germany
- Independent Power Producers Association of India
- New Zealand Coal & Carbon
- San Jose City I Power Corp, Philippines
- Manunggal Multi Energi - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Siam City Cement PLC, Thailand
- Vijayanagar Sugar Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Ind-Barath Power Infra Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- SN Aboitiz Power Inc, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Ministry of Transport, Egypt
- Carbofer General Trading SA - India
- The University of Queensland
- Toyota Tsusho Corporation, Japan
- Bukit Makmur.PT - Indonesia
- Coal and Oil Company - UAE
- CIMB Investment Bank - Malaysia
- Billiton Holdings Pty Ltd - Australia
- Bayan Resources Tbk. - Indonesia
- McConnell Dowell - Australia
- Petrochimia International Co. Ltd.- Taiwan
- Energy Development Corp, Philippines
- Uttam Galva Steels Limited - India
- Mintek Dendrill Indonesia
- Samtan Co., Ltd - South Korea
- Indian Oil Corporation Limited
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Asmin Koalindo Tuhup - Indonesia
- Indo Tambangraya Megah - Indonesia
- Gujarat Electricity Regulatory Commission - India
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