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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, 02 February 24
DRY BULK MARKET: THE DOWNWARD REVISION IN THE GROWTH OF CAPESIZE TONNE DAYS IN JANUARY WITH THE BCI DROPPING - MARIA BERTZELETOU
In the last week of January, the dry freight market sustained weakness in the Capesize segment, while the number of ballasters in the Southeast (SE ...
Friday, 02 February 24
COAL INDIA ACHIEVES NEARLY 80% OF ITS FY24 PRODUCTION TARGET IN TEN MONTHS - CNBCTV18
For the month of January, the company’s production grew by 9.1% from the same period last year to 78.4 Million Tonnes (MT), from 71.9 MT last ...
Thursday, 01 February 24
CHINA'S WIND, SOLAR CAPACITY TO OVERTAKE COAL IN 2024 - INDUSTRY BODY, REUTERS REPORTED
China’s installed wind and solar capacity is expected to overtake coal for the first time this year, according to industry forecasts.
&nb ...
Thursday, 01 February 24
ANTI-DEDUCTION CLAUSES: CAN A CHARTERER WITHHOLD HIRE WITHOUT AN OWNER'S CONSENT? - SKULD
KNOWLEDGE TO ELEVATE
Summary
In The Anna Dorothea, the Court found that where a charterparty provides that no deduction from hire may be m ...
Thursday, 01 February 24
INDIA REBUILDS COAL STOCKS TO ENSURE ELECTRIC RELIABILITY - REUTERS
India’s electricity supply is much more comfortable at the start of 2024 than in either 2023 or 2022 as coal production has ramped up and the ...
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- Neyveli Lignite Corporation Ltd, - India
- Electricity Authority, New Zealand
- Renaissance Capital - South Africa
- Sindya Power Generating Company Private Ltd
- The University of Queensland
- Bhushan Steel Limited - India
- Aboitiz Power Corporation - Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Jaiprakash Power Ventures ltd
- Bangladesh Power Developement Board
- Sarangani Energy Corporation, Philippines
- White Energy Company Limited
- Ministry of Mines - Canada
- Formosa Plastics Group - Taiwan
- Indo Tambangraya Megah - Indonesia
- PNOC Exploration Corporation - Philippines
- Mercator Lines Limited - India
- Sakthi Sugars Limited - India
- Australian Coal Association
- Bukit Asam (Persero) Tbk - Indonesia
- Orica Australia Pty. Ltd.
- Samtan Co., Ltd - South Korea
- Coastal Gujarat Power Limited - India
- Chamber of Mines of South Africa
- Maheswari Brothers Coal Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Commonwealth Bank - Australia
- Mintek Dendrill Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Siam City Cement - Thailand
- SMG Consultants - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Cement Manufacturers Association - India
- Wood Mackenzie - Singapore
- Karaikal Port Pvt Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Directorate General of MIneral and Coal - Indonesia
- Madhucon Powers Ltd - India
- Petron Corporation, Philippines
- The State Trading Corporation of India Ltd
- Indogreen Group - Indonesia
- European Bulk Services B.V. - Netherlands
- Port Waratah Coal Services - Australia
- Kideco Jaya Agung - Indonesia
- Manunggal Multi Energi - Indonesia
- Salva Resources Pvt Ltd - India
- Deloitte Consulting - India
- TeaM Sual Corporation - Philippines
- Asmin Koalindo Tuhup - Indonesia
- Savvy Resources Ltd - HongKong
- Indian Oil Corporation Limited
- Medco Energi Mining Internasional
- Kepco SPC Power Corporation, Philippines
- Aditya Birla Group - India
- Miang Besar Coal Terminal - Indonesia
- Iligan Light & Power Inc, Philippines
- Kartika Selabumi Mining - Indonesia
- Independent Power Producers Association of India
- Wilmar Investment Holdings
- Malabar Cements Ltd - India
- Kobexindo Tractors - Indoneisa
- Timah Investasi Mineral - Indoneisa
- TNB Fuel Sdn Bhd - Malaysia
- Attock Cement Pakistan Limited
- Uttam Galva Steels Limited - India
- GMR Energy Limited - India
- International Coal Ventures Pvt Ltd - India
- Parliament of New Zealand
- Pendopo Energi Batubara - Indonesia
- Vedanta Resources Plc - India
- South Luzon Thermal Energy Corporation
- Bank of Tokyo Mitsubishi UFJ Ltd
- Krishnapatnam Port Company Ltd. - India
- Sree Jayajothi Cements Limited - India
- Global Green Power PLC Corporation, Philippines
- Mjunction Services Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Edison Trading Spa - Italy
- Meralco Power Generation, Philippines
- Rashtriya Ispat Nigam Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sical Logistics Limited - India
- Thiess Contractors Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Jindal Steel & Power Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Alfred C Toepfer International GmbH - Germany
- SN Aboitiz Power Inc, Philippines
- Ministry of Finance - Indonesia
- Altura Mining Limited, Indonesia
- Metalloyd Limited - United Kingdom
- Xindia Steels Limited - India
- Siam City Cement PLC, Thailand
- Sojitz Corporation - Japan
- Kalimantan Lumbung Energi - Indonesia
- Rio Tinto Coal - Australia
- Electricity Generating Authority of Thailand
- Coal and Oil Company - UAE
- Ambuja Cements Ltd - India
- Thai Mozambique Logistica
- San Jose City I Power Corp, Philippines
- Indika Energy - Indonesia
- Bukit Baiduri Energy - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bukit Makmur.PT - Indonesia
- Chettinad Cement Corporation Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Grasim Industreis Ltd - India
- Simpson Spence & Young - Indonesia
- Power Finance Corporation Ltd., India
- Africa Commodities Group - South Africa
- Heidelberg Cement - Germany
- Ministry of Transport, Egypt
- New Zealand Coal & Carbon
- Energy Link Ltd, New Zealand
- Georgia Ports Authority, United States
- Billiton Holdings Pty Ltd - Australia
- Central Electricity Authority - India
- Merrill Lynch Commodities Europe
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Singapore Mercantile Exchange
- Trasteel International SA, Italy
- Posco Energy - South Korea
- PTC India Limited - India
- CIMB Investment Bank - Malaysia
- Maharashtra Electricity Regulatory Commission - India
- Globalindo Alam Lestari - Indonesia
- Makarim & Taira - Indonesia
- Bayan Resources Tbk. - Indonesia
- OPG Power Generation Pvt Ltd - India
- VISA Power Limited - India
- PowerSource Philippines DevCo
- Agrawal Coal Company - India
- Intertek Mineral Services - Indonesia
- Central Java Power - Indonesia
- Gujarat Sidhee Cement - India
- Standard Chartered Bank - UAE
- Toyota Tsusho Corporation, Japan
- Therma Luzon, Inc, Philippines
- Binh Thuan Hamico - Vietnam
- Dalmia Cement Bharat India
- Semirara Mining Corp, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Larsen & Toubro Limited - India
- Indonesian Coal Mining Association
- Goldman Sachs - Singapore
- Vizag Seaport Private Limited - India
- Essar Steel Hazira Ltd - India
- Global Business Power Corporation, Philippines
- Parry Sugars Refinery, India
- Riau Bara Harum - Indonesia
- Global Coal Blending Company Limited - Australia
- Planning Commission, India
- Anglo American - United Kingdom
- GAC Shipping (India) Pvt Ltd
- Videocon Industries ltd - India
- Energy Development Corp, Philippines
- Star Paper Mills Limited - India
- MS Steel International - UAE
- Indian Energy Exchange, India
- Holcim Trading Pte Ltd - Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kumho Petrochemical, South Korea
- Semirara Mining and Power Corporation, Philippines
- McConnell Dowell - Australia
- Sinarmas Energy and Mining - Indonesia
- Straits Asia Resources Limited - Singapore
- Mercuria Energy - Indonesia
- Ind-Barath Power Infra Limited - India
- Bharathi Cement Corporation - India
- Baramulti Group, Indonesia
- Lanco Infratech Ltd - India
- Australian Commodity Traders Exchange
- Romanian Commodities Exchange
- Coalindo Energy - Indonesia
- LBH Netherlands Bv - Netherlands
- SMC Global Power, Philippines
- Banpu Public Company Limited - Thailand
- Eastern Energy - Thailand
- ICICI Bank Limited - India
- Tamil Nadu electricity Board
- Economic Council, Georgia
- Orica Mining Services - Indonesia
- Price Waterhouse Coopers - Russia
- Vijayanagar Sugar Pvt Ltd - India
- ASAPP Information Group - India
- Bhatia International Limited - India
- Bulk Trading Sa - Switzerland
- Oldendorff Carriers - Singapore
- Minerals Council of Australia
- Latin American Coal - Colombia
- PetroVietnam Power Coal Import and Supply Company
- Kaltim Prima Coal - Indonesia
- Marubeni Corporation - India
- Meenaskhi Energy Private Limited - India
- CNBM International Corporation - China
- Tata Chemicals Ltd - India
- London Commodity Brokers - England
- Borneo Indobara - Indonesia
- Bhoruka Overseas - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Eastern Coal Council - USA
- Antam Resourcindo - Indonesia
- Interocean Group of Companies - India
- IEA Clean Coal Centre - UK
- India Bulls Power Limited - India
- Directorate Of Revenue Intelligence - India
- The Treasury - Australian Government
- IHS Mccloskey Coal Group - USA
- Carbofer General Trading SA - India
- GN Power Mariveles Coal Plant, Philippines
- Cigading International Bulk Terminal - Indonesia
- GVK Power & Infra Limited - India
- Barasentosa Lestari - Indonesia
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