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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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Tuesday, 22 May 12
NEW ONE-YEAR TIME CHARTERS FOR TWO VESSELS OF EXCEL MARITIME CARRIERS LTD.
Excel Maritime Carriers Ltd. (NYSE: EXM), an owner and operator of dry bulk carriers and an international provider of worldwide seaborne transportat ...
Tuesday, 22 May 12
DRY BULK MARKET STEADY, AWAITING FURTHER RISE IN DEMAND WHICH IS DOUBTFUL - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
Traditionally, the second and third quarters of the year are the strongest for the dry bulk market, but this year, things seem to be quite subdued, ...
Sunday, 20 May 12
SPOT FREIGHT RATE DIPS FURTHER - VISTAAR
COALspot.com - The BDI was marginally up by 3 points (0.26 pct) closing at 1,141 points.
The cape index was up by 1.17 pct closing at 1,633 point ...
Saturday, 19 May 12
INDONESIAN SUB-BITUMINOUS COAL SWAPS DROP US$ 2.88 PMT W-O-W
COALspot.com - Indonesian sub-bituminous coal swaps and CFR South China coal contracts for June deliveries have drops this week by 3.86 percent and& ...
Saturday, 19 May 12
INDONESIAN EXPORT TAX GIVES COAL MINERS A CHEAP RIDE: ANALYSTS - THE JAKARTA GLOBE
The Jakarta Globe reported that, Indonesia’s policy to exclude coal from an export tax that has been applied to 14 other mineral commodities h ...
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- Coal and Oil Company - UAE
- Leighton Contractors Pty Ltd - Australia
- Grasim Industreis Ltd - India
- Posco Energy - South Korea
- Wilmar Investment Holdings
- Miang Besar Coal Terminal - Indonesia
- Global Business Power Corporation, Philippines
- Altura Mining Limited, Indonesia
- SMC Global Power, Philippines
- Madhucon Powers Ltd - India
- Australian Coal Association
- Planning Commission, India
- Meenaskhi Energy Private Limited - India
- International Coal Ventures Pvt Ltd - India
- Baramulti Group, Indonesia
- Bukit Baiduri Energy - Indonesia
- Meralco Power Generation, Philippines
- Jindal Steel & Power Ltd - India
- Sarangani Energy Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- Georgia Ports Authority, United States
- Therma Luzon, Inc, Philippines
- Electricity Generating Authority of Thailand
- Central Java Power - Indonesia
- Renaissance Capital - South Africa
- IEA Clean Coal Centre - UK
- Siam City Cement PLC, Thailand
- Cigading International Bulk Terminal - Indonesia
- Ind-Barath Power Infra Limited - India
- Bhoruka Overseas - Indonesia
- Binh Thuan Hamico - Vietnam
- Electricity Authority, New Zealand
- LBH Netherlands Bv - Netherlands
- Banpu Public Company Limited - Thailand
- Ministry of Mines - Canada
- Singapore Mercantile Exchange
- OPG Power Generation Pvt Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Eastern Coal Council - USA
- Eastern Energy - Thailand
- Makarim & Taira - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- India Bulls Power Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Coastal Gujarat Power Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- GMR Energy Limited - India
- Straits Asia Resources Limited - Singapore
- Savvy Resources Ltd - HongKong
- Central Electricity Authority - India
- SN Aboitiz Power Inc, Philippines
- Riau Bara Harum - Indonesia
- San Jose City I Power Corp, Philippines
- Mercator Lines Limited - India
- Bharathi Cement Corporation - India
- Semirara Mining Corp, Philippines
- Semirara Mining and Power Corporation, Philippines
- Kumho Petrochemical, South Korea
- Vijayanagar Sugar Pvt Ltd - India
- Energy Development Corp, Philippines
- Independent Power Producers Association of India
- Salva Resources Pvt Ltd - India
- Indika Energy - Indonesia
- Oldendorff Carriers - Singapore
- Mjunction Services Limited - India
- Sree Jayajothi Cements Limited - India
- Vizag Seaport Private Limited - India
- Essar Steel Hazira Ltd - India
- Indogreen Group - Indonesia
- Wood Mackenzie - Singapore
- New Zealand Coal & Carbon
- Latin American Coal - Colombia
- Sindya Power Generating Company Private Ltd
- Pipit Mutiara Jaya. PT, Indonesia
- Edison Trading Spa - Italy
- GAC Shipping (India) Pvt Ltd
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bhatia International Limited - India
- PowerSource Philippines DevCo
- Kalimantan Lumbung Energi - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Bukit Makmur.PT - Indonesia
- Indo Tambangraya Megah - Indonesia
- Star Paper Mills Limited - India
- Alfred C Toepfer International GmbH - Germany
- Agrawal Coal Company - India
- Maharashtra Electricity Regulatory Commission - India
- Jaiprakash Power Ventures ltd
- Manunggal Multi Energi - Indonesia
- Mercuria Energy - Indonesia
- Directorate Of Revenue Intelligence - India
- Rashtriya Ispat Nigam Limited - India
- Power Finance Corporation Ltd., India
- VISA Power Limited - India
- Formosa Plastics Group - Taiwan
- Attock Cement Pakistan Limited
- Merrill Lynch Commodities Europe
- Kideco Jaya Agung - Indonesia
- Bhushan Steel Limited - India
- Minerals Council of Australia
- CNBM International Corporation - China
- Lanco Infratech Ltd - India
- White Energy Company Limited
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Globalindo Alam Lestari - Indonesia
- Commonwealth Bank - Australia
- Intertek Mineral Services - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Cement Manufacturers Association - India
- Economic Council, Georgia
- PetroVietnam Power Coal Import and Supply Company
- Malabar Cements Ltd - India
- Toyota Tsusho Corporation, Japan
- Anglo American - United Kingdom
- Mintek Dendrill Indonesia
- Bayan Resources Tbk. - Indonesia
- Bangladesh Power Developement Board
- Indian Energy Exchange, India
- Sakthi Sugars Limited - India
- Heidelberg Cement - Germany
- Gujarat Mineral Development Corp Ltd - India
- London Commodity Brokers - England
- Orica Mining Services - Indonesia
- TeaM Sual Corporation - Philippines
- ICICI Bank Limited - India
- Dalmia Cement Bharat India
- Barasentosa Lestari - Indonesia
- McConnell Dowell - Australia
- Kohat Cement Company Ltd. - Pakistan
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Medco Energi Mining Internasional
- Petron Corporation, Philippines
- Standard Chartered Bank - UAE
- Kartika Selabumi Mining - Indonesia
- Videocon Industries ltd - India
- Simpson Spence & Young - Indonesia
- Uttam Galva Steels Limited - India
- Kepco SPC Power Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Trasteel International SA, Italy
- Bank of Tokyo Mitsubishi UFJ Ltd
- Metalloyd Limited - United Kingdom
- Kobexindo Tractors - Indoneisa
- Parry Sugars Refinery, India
- Directorate General of MIneral and Coal - Indonesia
- Iligan Light & Power Inc, Philippines
- Thiess Contractors Indonesia
- Sinarmas Energy and Mining - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Karaikal Port Pvt Ltd - India
- Romanian Commodities Exchange
- Borneo Indobara - Indonesia
- South Luzon Thermal Energy Corporation
- Africa Commodities Group - South Africa
- Carbofer General Trading SA - India
- Siam City Cement - Thailand
- Global Coal Blending Company Limited - Australia
- Deloitte Consulting - India
- Aditya Birla Group - India
- GVK Power & Infra Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- PTC India Limited - India
- Maheswari Brothers Coal Limited - India
- Sical Logistics Limited - India
- Holcim Trading Pte Ltd - Singapore
- Interocean Group of Companies - India
- Krishnapatnam Port Company Ltd. - India
- The University of Queensland
- Kaltim Prima Coal - Indonesia
- IHS Mccloskey Coal Group - USA
- Chamber of Mines of South Africa
- Parliament of New Zealand
- Goldman Sachs - Singapore
- Kapuas Tunggal Persada - Indonesia
- Australian Commodity Traders Exchange
- Samtan Co., Ltd - South Korea
- Tata Chemicals Ltd - India
- European Bulk Services B.V. - Netherlands
- Orica Australia Pty. Ltd.
- Billiton Holdings Pty Ltd - Australia
- Asmin Koalindo Tuhup - Indonesia
- Coalindo Energy - Indonesia
- Thai Mozambique Logistica
- The Treasury - Australian Government
- Tamil Nadu electricity Board
- Ministry of Finance - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Indian Oil Corporation Limited
- Global Green Power PLC Corporation, Philippines
- MS Steel International - UAE
- Chettinad Cement Corporation Ltd - India
- Gujarat Sidhee Cement - India
- Xindia Steels Limited - India
- The State Trading Corporation of India Ltd
- Antam Resourcindo - Indonesia
- Aboitiz Power Corporation - Philippines
- Sojitz Corporation - Japan
- Marubeni Corporation - India
- Larsen & Toubro Limited - India
- ASAPP Information Group - India
- Energy Link Ltd, New Zealand
- Price Waterhouse Coopers - Russia
- Timah Investasi Mineral - Indoneisa
- Vedanta Resources Plc - India
- Pendopo Energi Batubara - Indonesia
- Ministry of Transport, Egypt
- Port Waratah Coal Services - Australia
- PNOC Exploration Corporation - Philippines
- CIMB Investment Bank - Malaysia
- Neyveli Lignite Corporation Ltd, - India
- Ceylon Electricity Board - Sri Lanka
- Ambuja Cements Ltd - India
- SMG Consultants - Indonesia
- Rio Tinto Coal - Australia
- Bulk Trading Sa - Switzerland
- Indonesian Coal Mining Association
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