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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, 01 May 12
VIETNAM FEARS IT MAY NOT SEEK COAL SUPPLIES - TBKTSG / VIETNAMNET BRIDGE
TBKTSG / VietNamNet Bridge reported that, with five coal-run thermopower plants under construction, PetroVietnam alone would need 18 million tons of ...
Sunday, 29 April 12
THE FREIGHT MARKET EXPECTED TO BE STEADY NEXT WEEK - VISTAAR
COALspot.com - The BDI continued to go up with the support of Panamax/Supramax and was up by 8.34 pct closing at 1,156 points.
The cape index was ...
Sunday, 29 April 12
INDONESIAN SUB-BITUMINOUS COAL SWAPS FOR MAY 2012 DELIVERY WAS STABLE THIS WEEK
COALspot.com - Indonesian sub-bituminous coal swaps for May deliveries stable this week, according to DSP of SGX AsiaClear OTC Coal Swaps. In the me ...
Friday, 27 April 12
BUKIT ASAMS NET INCOME UP 14% IN 1Q 2012 (UNAUDITED)
Press Release - PT Bukit Asam (Persero) Tbk, announced the Consolidated Financial Statements and Subsidiaries per 31 March 2012 (Unaudited).
Reve ...
Thursday, 26 April 12
AUSTRALIAS COKAL EXPANDS MET COAL POTENTIAL INTO WEST KALIMANTAN
COALspot.com - Global metallurgical coal group Cokal Limited (Cokal) (ASX:CKA) announced today it has completed the acquisition of 75.2% of PT Silan ...
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- Merrill Lynch Commodities Europe
- Global Green Power PLC Corporation, Philippines
- Uttam Galva Steels Limited - India
- Coalindo Energy - Indonesia
- South Luzon Thermal Energy Corporation
- Barasentosa Lestari - Indonesia
- CNBM International Corporation - China
- Marubeni Corporation - India
- Deloitte Consulting - India
- Thai Mozambique Logistica
- Parliament of New Zealand
- Bhatia International Limited - India
- Indonesian Coal Mining Association
- India Bulls Power Limited - India
- ASAPP Information Group - India
- Petron Corporation, Philippines
- Interocean Group of Companies - India
- Energy Development Corp, Philippines
- SN Aboitiz Power Inc, Philippines
- Parry Sugars Refinery, India
- ICICI Bank Limited - India
- Anglo American - United Kingdom
- Indian Energy Exchange, India
- Electricity Generating Authority of Thailand
- IHS Mccloskey Coal Group - USA
- Star Paper Mills Limited - India
- Kobexindo Tractors - Indoneisa
- Cigading International Bulk Terminal - Indonesia
- Binh Thuan Hamico - Vietnam
- PTC India Limited - India
- Africa Commodities Group - South Africa
- Altura Mining Limited, Indonesia
- European Bulk Services B.V. - Netherlands
- Sree Jayajothi Cements Limited - India
- Karaikal Port Pvt Ltd - India
- Indogreen Group - Indonesia
- Vedanta Resources Plc - India
- Jorong Barutama Greston.PT - Indonesia
- Kumho Petrochemical, South Korea
- Kapuas Tunggal Persada - Indonesia
- Bhoruka Overseas - Indonesia
- Central Electricity Authority - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Savvy Resources Ltd - HongKong
- Maheswari Brothers Coal Limited - India
- Wood Mackenzie - Singapore
- Vizag Seaport Private Limited - India
- Port Waratah Coal Services - Australia
- Standard Chartered Bank - UAE
- Karbindo Abesyapradhi - Indoneisa
- GVK Power & Infra Limited - India
- Carbofer General Trading SA - India
- PowerSource Philippines DevCo
- Leighton Contractors Pty Ltd - Australia
- Ceylon Electricity Board - Sri Lanka
- Indo Tambangraya Megah - Indonesia
- Kaltim Prima Coal - Indonesia
- Romanian Commodities Exchange
- Sinarmas Energy and Mining - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Miang Besar Coal Terminal - Indonesia
- Goldman Sachs - Singapore
- Mercuria Energy - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- OPG Power Generation Pvt Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Chamber of Mines of South Africa
- Ind-Barath Power Infra Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Simpson Spence & Young - Indonesia
- Grasim Industreis Ltd - India
- SMG Consultants - Indonesia
- Heidelberg Cement - Germany
- Gujarat Electricity Regulatory Commission - India
- Pendopo Energi Batubara - Indonesia
- Formosa Plastics Group - Taiwan
- Directorate Of Revenue Intelligence - India
- Singapore Mercantile Exchange
- Holcim Trading Pte Ltd - Singapore
- Kalimantan Lumbung Energi - Indonesia
- Australian Commodity Traders Exchange
- Price Waterhouse Coopers - Russia
- Alfred C Toepfer International GmbH - Germany
- Orica Mining Services - Indonesia
- Mintek Dendrill Indonesia
- Coastal Gujarat Power Limited - India
- Trasteel International SA, Italy
- The University of Queensland
- Attock Cement Pakistan Limited
- Malabar Cements Ltd - India
- Xindia Steels Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- Planning Commission, India
- Toyota Tsusho Corporation, Japan
- Posco Energy - South Korea
- Jindal Steel & Power Ltd - India
- Baramulti Group, Indonesia
- Semirara Mining Corp, Philippines
- Samtan Co., Ltd - South Korea
- Renaissance Capital - South Africa
- Orica Australia Pty. Ltd.
- Global Coal Blending Company Limited - Australia
- CIMB Investment Bank - Malaysia
- Eastern Coal Council - USA
- Globalindo Alam Lestari - Indonesia
- Aboitiz Power Corporation - Philippines
- Georgia Ports Authority, United States
- Gujarat Sidhee Cement - India
- Bangladesh Power Developement Board
- MS Steel International - UAE
- Asia Pacific Energy Resources Ventures Inc, Philippines
- McConnell Dowell - Australia
- Electricity Authority, New Zealand
- Kartika Selabumi Mining - Indonesia
- International Coal Ventures Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Indian Oil Corporation Limited
- SMC Global Power, Philippines
- Bulk Trading Sa - Switzerland
- GAC Shipping (India) Pvt Ltd
- Salva Resources Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- Mjunction Services Limited - India
- Australian Coal Association
- Ambuja Cements Ltd - India
- Jaiprakash Power Ventures ltd
- Dalmia Cement Bharat India
- Larsen & Toubro Limited - India
- Aditya Birla Group - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bukit Asam (Persero) Tbk - Indonesia
- Antam Resourcindo - Indonesia
- Independent Power Producers Association of India
- Ministry of Transport, Egypt
- Sojitz Corporation - Japan
- Sindya Power Generating Company Private Ltd
- Essar Steel Hazira Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Global Business Power Corporation, Philippines
- White Energy Company Limited
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Eastern Energy - Thailand
- Videocon Industries ltd - India
- Latin American Coal - Colombia
- London Commodity Brokers - England
- Ministry of Finance - Indonesia
- Bhushan Steel Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Commonwealth Bank - Australia
- Chettinad Cement Corporation Ltd - India
- TeaM Sual Corporation - Philippines
- San Jose City I Power Corp, Philippines
- Riau Bara Harum - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sical Logistics Limited - India
- Sarangani Energy Corporation, Philippines
- Bharathi Cement Corporation - India
- Meenaskhi Energy Private Limited - India
- Central Java Power - Indonesia
- Lanco Infratech Ltd - India
- The Treasury - Australian Government
- Siam City Cement - Thailand
- Energy Link Ltd, New Zealand
- Banpu Public Company Limited - Thailand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Economic Council, Georgia
- Sakthi Sugars Limited - India
- Mercator Lines Limited - India
- Thiess Contractors Indonesia
- Kideco Jaya Agung - Indonesia
- Indika Energy - Indonesia
- Metalloyd Limited - United Kingdom
- Rashtriya Ispat Nigam Limited - India
- Intertek Mineral Services - Indonesia
- Kepco SPC Power Corporation, Philippines
- Agrawal Coal Company - India
- Edison Trading Spa - Italy
- LBH Netherlands Bv - Netherlands
- Tata Chemicals Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Wilmar Investment Holdings
- Minerals Council of Australia
- VISA Power Limited - India
- New Zealand Coal & Carbon
- Asmin Koalindo Tuhup - Indonesia
- Meralco Power Generation, Philippines
- Medco Energi Mining Internasional
- Power Finance Corporation Ltd., India
- Billiton Holdings Pty Ltd - Australia
- PNOC Exploration Corporation - Philippines
- Borneo Indobara - Indonesia
- Bukit Baiduri Energy - Indonesia
- Bukit Makmur.PT - Indonesia
- Coal and Oil Company - UAE
- GMR Energy Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Kohat Cement Company Ltd. - Pakistan
- AsiaOL BioFuels Corp., Philippines
- Timah Investasi Mineral - Indoneisa
- IEA Clean Coal Centre - UK
- Bayan Resources Tbk. - Indonesia
- Cement Manufacturers Association - India
- Straits Asia Resources Limited - Singapore
- Ministry of Mines - Canada
- Tamil Nadu electricity Board
- Oldendorff Carriers - Singapore
- Madhucon Powers Ltd - India
- The State Trading Corporation of India Ltd
- Siam City Cement PLC, Thailand
- Makarim & Taira - Indonesia
- Therma Luzon, Inc, Philippines
- Rio Tinto Coal - Australia
- Semirara Mining and Power Corporation, Philippines
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