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Friday, 09 March 12
MINING IN INDONESIA: RESTRICTION ON FOREIGN INVESTMENT - SUNIL K KUMBHAT
 COALspot.com - Recently Govt has passed regulation instructing foreign mining companies to reduce their ownership stake.
The regulation known as GR 24 of 2012 ( Amendment of GR 23 of 2010 ), signed by President of Indonesia on Feb. 21,2012 stipulates that foreign shareholders/ Companies must gradually divest 51 percent of their shares in local mining companies to local investors after the fifth year of commercial production and complete the divestment by the 10th year of production. The divestment regulation resulted from a revision to a earlier GR 23 of 2010 that required foreign shareholders in local mineral and coal mining companies to divest 20 percent of their holdings.
The Director general for minerals and coals, said the regulation would not directly apply to contracts made prior to the issuance of the regulation , but so far no clarification in writing.
Local investors were defined by the regulation as the:
1.Central government,
2.Provincial , regency or municipal governments,
3.State-owned enterprises,
4.Regional enterprises and
5.National private companies.
The disinvestment shares are to be offered to entities in the order of priority listed above by way of auction.
Under the new requirement, mining companies must divest a total of 20 percent of their foreign shares from 6th year of starting production, 30 percent by the seventh year, 37 percent by the eighth year, 44 percent by the ninth year and 51 percent by the 10th year.
Prior to the issueance of GR 24/2012 , Mining Licences (IUP's) could not be transferred or assigned from one entity to another but GR 24/2012 provides that an Mining Licence may be transferred to another entity on the basis that the transferor holds a minimum of 51% of the shares in the assignee.
It effectively means foreigners are going to lose control after 10 years. Mining Sector is a capital intensive, risky , Complicated and time consuming business to invest in. By passing regulation and forcing foreign companies to divest within a fixed time frame and drastically changing the mining regulations is likely to discourage the interest of potential foreign investors to invest in the Mining Sector.
Historically, major foreign backed mining projects in Indonesia have been developed under contract based concessions - Contracts of Work (CoW) and Coal Contracts of work( CCoW )- entered into directly with the Government. These contracts covered the life of the project and larger areas than the new licence regime and were seen as a more secure regime , having economic and fiscal terms agreed in a contract that formed a "special law" between the Government and the mining company. In broad perspective such major changes in Govt regulations and increasing uncertainty and shift in foreign investment policy in the mining sector may consequently impact investment interest in other sector also.
The government is currently renegotiating all its contracts with CoW / CCoW mining companies across the nation in compliance with provisions of the 2009 Minerals and Coal Law.
The regulation would act as a disincentive for mining companies as five years is too short period to begin divestment, given that firms typically had 8 to 10 years to repay bank loans. If they have to divest 51% within 10 years, they are not yet reaching the break-even point of their investment.
Indonesia ,southeast Asia’s largest economy contains some of the world’s richest mineral deposits, such as the Freeport-run Grasberg, the world’s largest gold mine, and its fast-growing mining sector accounts for about 10-11 percent of GDP. The new regulation is the latest government move to extract higher domestic profit from the vast mineral wealth in the world’s top exporter of thermal coal and other minerals like tin , nickel, copper , Bauxite etc. But the change in regulation may deter foreign investment in mining sector.
The 2009 mining law was aimed at boosting investment in mining and metals processing, but its supporting regulations have not gone down well with the industry, and new investors still face risks such as policy reversals, local community demands, a tortuous permit process and poor infrastructure.
The latest regulation stipulating foreign ownership in Indonesia’s mining industry is bound to upset foreign investors and cheer local companies. The ruling will limit foreign companies from owning more than 49 percent of some mines, potentially limiting investments in a fast-growing sector.
Under the new regulation, foreign holders/ Companies of mining licenses in Indonesia , will have to cut their stakes to 49 percent at most within 10 years of starting production. Many foreign investors have already expressed grave concerns over this new ruling, arguing that mining is a capital-intensive industry and requires a long payback period.
Under the new ruling, foreign owners’ coal and minerals assets would required to sell the shares to the central and regional governments, state-owned companies or local private companies. This is itself not new, but the new time frame means that investors will not have enough time to recoup their investments, let alone make a profit.
Any country and Indonesia in this particular issue has every right to dictate the terms and conditions for foreign investors who wish to invest in the country. Many other countries also protect their local businesses, and it is the government’s duty to ensure that its own citizens benefit from the nation’s natural wealth.
Foreign investors often take huge risks and invest billions of dollars before they see returns. Their risk-taking allows the mining sector to grow and develop; without them, the country will be worse off. They have a right to expect a reasonable return on their investment, too.
The regulation had been promulgated with good intentions to empower local companies and boost their involvement in the mining industry.
But a balance must be struck between the two goals: attracting foreign investments and ensuring local communities also benefit. By requiring foreign shareholders to sell their stakes in mining assets to local entities, the government is attempting to strike this balance. The key issue is proper calibration of risk and reward ,considering the law of the land.
In spite of the fact that Mining sector in Indonesia is overregulated and lot of uncertainties ,the mining sector will remain most hot sector and cannot be ignored. There is always cost of doing business in Indonesia.
By : Sunil K Kumbhat , Jodhpur( Rajasthan ) India
Views expressed herein are personal views of the author and not that of COALspot.com.
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Friday, 01 June 12
COKAL ACCEPTED ON THE CLEAN AND CLEAR LIST FOR ITS BORNEO BARA PRIMA AND BUMI BARITO MINERAL PROJECTS
- Borneo Bara Prima (BBP) Project confirmed on the Clean and Clear List 9th May 2012
- Bumi Barito Mineral (BBM) Project confirmed on the Clean and ...
Friday, 01 June 12
ADARO BUYS MAJORITY STAKE IN AFFILIATED BHAKTI ENERGI - INSIDER STORIES
Insider Stories reported that, PT Adaro Energy Tbk entered into an option to provide a convertible loan of up to US$500 million for a period of 3 ye ...
Thursday, 31 May 12
DRY BULK MARKET UNABLE TO FIND NEW SUPPORT TO REACH HIGHER LEVELS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market has been unable to find new support and recover to higher levels during these past few days. As a result, the Baltic Dry Index ( ...
Wednesday, 30 May 12
ORPHEUS RAISES $2.24M TO ADVANCE INDONESIAN COAL PRODUCTION ASSETS
• $2.24 million raised from a placement to new and existing institutional and sophisticated investors from Australia and overseas
• Funds ...
Wednesday, 30 May 12
ARPENI SECURES TRANSSHIPMENT CONTRACT FROM BARUNA DIRGA
Insider Stories reported that, shipping operator PT Arpeni Pratama Ocean Line Tbk (APOL) has secured a 1-year coal transhipment contract of 4 millio ...
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- McConnell Dowell - Australia
- Vizag Seaport Private Limited - India
- Leighton Contractors Pty Ltd - Australia
- Central Electricity Authority - India
- Mintek Dendrill Indonesia
- Interocean Group of Companies - India
- Indika Energy - Indonesia
- Meenaskhi Energy Private Limited - India
- Orica Mining Services - Indonesia
- Essar Steel Hazira Ltd - India
- Australian Coal Association
- Global Business Power Corporation, Philippines
- Eastern Energy - Thailand
- Gujarat Sidhee Cement - India
- Mercuria Energy - Indonesia
- White Energy Company Limited
- Ceylon Electricity Board - Sri Lanka
- Binh Thuan Hamico - Vietnam
- Aboitiz Power Corporation - Philippines
- Global Coal Blending Company Limited - Australia
- Minerals Council of Australia
- Borneo Indobara - Indonesia
- Ambuja Cements Ltd - India
- Karaikal Port Pvt Ltd - India
- Chamber of Mines of South Africa
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Posco Energy - South Korea
- GVK Power & Infra Limited - India
- Banpu Public Company Limited - Thailand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- ICICI Bank Limited - India
- Price Waterhouse Coopers - Russia
- Wood Mackenzie - Singapore
- Sarangani Energy Corporation, Philippines
- Marubeni Corporation - India
- Therma Luzon, Inc, Philippines
- Heidelberg Cement - Germany
- Pipit Mutiara Jaya. PT, Indonesia
- OPG Power Generation Pvt Ltd - India
- Sojitz Corporation - Japan
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bhoruka Overseas - Indonesia
- Goldman Sachs - Singapore
- Bulk Trading Sa - Switzerland
- Directorate General of MIneral and Coal - Indonesia
- Ministry of Mines - Canada
- Renaissance Capital - South Africa
- Bhushan Steel Limited - India
- Bhatia International Limited - India
- Mercator Lines Limited - India
- Larsen & Toubro Limited - India
- GN Power Mariveles Coal Plant, Philippines
- London Commodity Brokers - England
- Krishnapatnam Port Company Ltd. - India
- Billiton Holdings Pty Ltd - Australia
- Directorate Of Revenue Intelligence - India
- Kepco SPC Power Corporation, Philippines
- Thiess Contractors Indonesia
- Anglo American - United Kingdom
- Sakthi Sugars Limited - India
- Salva Resources Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- GAC Shipping (India) Pvt Ltd
- TeaM Sual Corporation - Philippines
- Eastern Coal Council - USA
- Coastal Gujarat Power Limited - India
- Vedanta Resources Plc - India
- Neyveli Lignite Corporation Ltd, - India
- The University of Queensland
- Latin American Coal - Colombia
- Savvy Resources Ltd - HongKong
- Dalmia Cement Bharat India
- Africa Commodities Group - South Africa
- SMG Consultants - Indonesia
- Kideco Jaya Agung - Indonesia
- Coalindo Energy - Indonesia
- International Coal Ventures Pvt Ltd - India
- Carbofer General Trading SA - India
- Kapuas Tunggal Persada - Indonesia
- Independent Power Producers Association of India
- Makarim & Taira - Indonesia
- Medco Energi Mining Internasional
- Karbindo Abesyapradhi - Indoneisa
- Intertek Mineral Services - Indonesia
- Singapore Mercantile Exchange
- Madhucon Powers Ltd - India
- Coal and Oil Company - UAE
- Edison Trading Spa - Italy
- The Treasury - Australian Government
- Maheswari Brothers Coal Limited - India
- Indian Energy Exchange, India
- GMR Energy Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Pendopo Energi Batubara - Indonesia
- Meralco Power Generation, Philippines
- Star Paper Mills Limited - India
- Tata Chemicals Ltd - India
- South Luzon Thermal Energy Corporation
- Xindia Steels Limited - India
- Altura Mining Limited, Indonesia
- Trasteel International SA, Italy
- IEA Clean Coal Centre - UK
- SMC Global Power, Philippines
- San Jose City I Power Corp, Philippines
- Gujarat Mineral Development Corp Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Riau Bara Harum - Indonesia
- India Bulls Power Limited - India
- Petron Corporation, Philippines
- Bukit Baiduri Energy - Indonesia
- Metalloyd Limited - United Kingdom
- Rashtriya Ispat Nigam Limited - India
- Sinarmas Energy and Mining - Indonesia
- Siam City Cement PLC, Thailand
- Commonwealth Bank - Australia
- Simpson Spence & Young - Indonesia
- Ministry of Transport, Egypt
- TNB Fuel Sdn Bhd - Malaysia
- ASAPP Information Group - India
- Power Finance Corporation Ltd., India
- New Zealand Coal & Carbon
- Indogreen Group - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Jindal Steel & Power Ltd - India
- Bayan Resources Tbk. - Indonesia
- CIMB Investment Bank - Malaysia
- Bahari Cakrawala Sebuku - Indonesia
- Electricity Generating Authority of Thailand
- Samtan Co., Ltd - South Korea
- Malabar Cements Ltd - India
- Kartika Selabumi Mining - Indonesia
- Port Waratah Coal Services - Australia
- Mjunction Services Limited - India
- Agrawal Coal Company - India
- Wilmar Investment Holdings
- Indonesian Coal Mining Association
- Bank of Tokyo Mitsubishi UFJ Ltd
- Merrill Lynch Commodities Europe
- Ministry of Finance - Indonesia
- SN Aboitiz Power Inc, Philippines
- PNOC Exploration Corporation - Philippines
- Cigading International Bulk Terminal - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Indo Tambangraya Megah - Indonesia
- MS Steel International - UAE
- Economic Council, Georgia
- Baramulti Group, Indonesia
- Aditya Birla Group - India
- Semirara Mining Corp, Philippines
- European Bulk Services B.V. - Netherlands
- Energy Development Corp, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Sree Jayajothi Cements Limited - India
- Attock Cement Pakistan Limited
- Parry Sugars Refinery, India
- Energy Link Ltd, New Zealand
- Lanco Infratech Ltd - India
- Sindya Power Generating Company Private Ltd
- Videocon Industries ltd - India
- Bukit Makmur.PT - Indonesia
- Manunggal Multi Energi - Indonesia
- IHS Mccloskey Coal Group - USA
- Sical Logistics Limited - India
- Siam City Cement - Thailand
- PTC India Limited - India
- Antam Resourcindo - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Barasentosa Lestari - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Standard Chartered Bank - UAE
- Offshore Bulk Terminal Pte Ltd, Singapore
- Cement Manufacturers Association - India
- Kumho Petrochemical, South Korea
- Grasim Industreis Ltd - India
- Globalindo Alam Lestari - Indonesia
- Deloitte Consulting - India
- Bangladesh Power Developement Board
- Kohat Cement Company Ltd. - Pakistan
- CNBM International Corporation - China
- The State Trading Corporation of India Ltd
- Straits Asia Resources Limited - Singapore
- Thai Mozambique Logistica
- Asia Pacific Energy Resources Ventures Inc, Philippines
- VISA Power Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Central Java Power - Indonesia
- Timah Investasi Mineral - Indoneisa
- Toyota Tsusho Corporation, Japan
- Rio Tinto Coal - Australia
- Georgia Ports Authority, United States
- Kaltim Prima Coal - Indonesia
- Global Green Power PLC Corporation, Philippines
- Alfred C Toepfer International GmbH - Germany
- Chettinad Cement Corporation Ltd - India
- Tamil Nadu electricity Board
- Orica Australia Pty. Ltd.
- Parliament of New Zealand
- Kobexindo Tractors - Indoneisa
- Uttam Galva Steels Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Indian Oil Corporation Limited
- Gujarat Electricity Regulatory Commission - India
- LBH Netherlands Bv - Netherlands
- Maharashtra Electricity Regulatory Commission - India
- Australian Commodity Traders Exchange
- Ind-Barath Power Infra Limited - India
- PowerSource Philippines DevCo
- Bharathi Cement Corporation - India
- Oldendorff Carriers - Singapore
- Planning Commission, India
- Miang Besar Coal Terminal - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Holcim Trading Pte Ltd - Singapore
- Formosa Plastics Group - Taiwan
- Romanian Commodities Exchange
- Electricity Authority, New Zealand
- Jaiprakash Power Ventures ltd
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