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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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Thursday, 26 April 12
PANAMAXES AGAIN EARN MORE THAN CAPESIZES - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The latest surge of demand for Panamaxes has led the dry bulk market to new higher ground on Monday, with the Baltic Dry Index (BDI) reaching 1,090 ...
Wednesday, 25 April 12
CHINA IMPORTS 9.76 MMT AND INDIA IMPORTS 7.03 MMT OF INDONESIAN COAL LAST MONTH
COALspot.com: Indonesia, the world largest coal exporter, shipped 30.64* million tons of coal in March 2012, compared to 27.12* million tons i ...
Monday, 23 April 12
ALTURA ENTERS INTO AGREEMENT TO ACQUIRE 2 COAL PROJECTS IN SOUTH KALIMANTAN
COALspot.com - Altura Mining Limited (ASX: AJM) has announced that it has entered into an agreement to acquire a further two (2) Mining Permits (IUP ...
Sunday, 22 April 12
THE FREIGHT MARKET EXPECTED TO REMAIN FIRM NEXT WEEK - VISTAAR
COALspot.com - The BDI has broken the psychological barrier of 1000 points and closed at 1067 points.
The cape index was slightly down by 2.48 pc ...
Saturday, 21 April 12
INDONESIAN SUB-BITUMINOUS COAL SWAPS DROP 2.61 PERCENT THIS WEEK
COALspot.com - Indonesian sub-bituminous coal swaps fell for a fifth day, according to DSP of SGX AsiaClear OTC Coal Swaps.
CFR South China Coal ...
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- Kapuas Tunggal Persada - Indonesia
- PowerSource Philippines DevCo
- Rio Tinto Coal - Australia
- Krishnapatnam Port Company Ltd. - India
- Economic Council, Georgia
- Indian Oil Corporation Limited
- VISA Power Limited - India
- Sindya Power Generating Company Private Ltd
- Orica Mining Services - Indonesia
- Heidelberg Cement - Germany
- SN Aboitiz Power Inc, Philippines
- Goldman Sachs - Singapore
- Madhucon Powers Ltd - India
- Indonesian Coal Mining Association
- Global Coal Blending Company Limited - Australia
- Merrill Lynch Commodities Europe
- Meenaskhi Energy Private Limited - India
- Thiess Contractors Indonesia
- Salva Resources Pvt Ltd - India
- Eastern Coal Council - USA
- Leighton Contractors Pty Ltd - Australia
- AsiaOL BioFuels Corp., Philippines
- PNOC Exploration Corporation - Philippines
- Central Java Power - Indonesia
- Globalindo Alam Lestari - Indonesia
- Chamber of Mines of South Africa
- Ind-Barath Power Infra Limited - India
- Electricity Generating Authority of Thailand
- San Jose City I Power Corp, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kalimantan Lumbung Energi - Indonesia
- Bulk Trading Sa - Switzerland
- Renaissance Capital - South Africa
- Ministry of Transport, Egypt
- Dalmia Cement Bharat India
- Parliament of New Zealand
- Grasim Industreis Ltd - India
- GAC Shipping (India) Pvt Ltd
- Baramulti Group, Indonesia
- Orica Australia Pty. Ltd.
- Kepco SPC Power Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- IHS Mccloskey Coal Group - USA
- Pipit Mutiara Jaya. PT, Indonesia
- Borneo Indobara - Indonesia
- Therma Luzon, Inc, Philippines
- Australian Commodity Traders Exchange
- Malabar Cements Ltd - India
- Indika Energy - Indonesia
- IEA Clean Coal Centre - UK
- London Commodity Brokers - England
- Minerals Council of Australia
- Altura Mining Limited, Indonesia
- Edison Trading Spa - Italy
- Straits Asia Resources Limited - Singapore
- Planning Commission, India
- Kartika Selabumi Mining - Indonesia
- Tamil Nadu electricity Board
- Coal and Oil Company - UAE
- Chettinad Cement Corporation Ltd - India
- Iligan Light & Power Inc, Philippines
- Georgia Ports Authority, United States
- Independent Power Producers Association of India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- TeaM Sual Corporation - Philippines
- Karaikal Port Pvt Ltd - India
- Coalindo Energy - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Maheswari Brothers Coal Limited - India
- Wilmar Investment Holdings
- Global Green Power PLC Corporation, Philippines
- Trasteel International SA, Italy
- Energy Link Ltd, New Zealand
- Sinarmas Energy and Mining - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Bangladesh Power Developement Board
- Africa Commodities Group - South Africa
- Central Electricity Authority - India
- Savvy Resources Ltd - HongKong
- Commonwealth Bank - Australia
- Bhatia International Limited - India
- Gujarat Electricity Regulatory Commission - India
- Oldendorff Carriers - Singapore
- Semirara Mining Corp, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Essar Steel Hazira Ltd - India
- Binh Thuan Hamico - Vietnam
- Power Finance Corporation Ltd., India
- Energy Development Corp, Philippines
- Price Waterhouse Coopers - Russia
- Ceylon Electricity Board - Sri Lanka
- Gujarat Sidhee Cement - India
- Pendopo Energi Batubara - Indonesia
- Rashtriya Ispat Nigam Limited - India
- ICICI Bank Limited - India
- Attock Cement Pakistan Limited
- CNBM International Corporation - China
- Carbofer General Trading SA - India
- Metalloyd Limited - United Kingdom
- Simpson Spence & Young - Indonesia
- Eastern Energy - Thailand
- Kobexindo Tractors - Indoneisa
- Antam Resourcindo - Indonesia
- ASAPP Information Group - India
- Lanco Infratech Ltd - India
- Bayan Resources Tbk. - Indonesia
- McConnell Dowell - Australia
- Cigading International Bulk Terminal - Indonesia
- Anglo American - United Kingdom
- Parry Sugars Refinery, India
- White Energy Company Limited
- Vedanta Resources Plc - India
- Latin American Coal - Colombia
- Ministry of Finance - Indonesia
- Mjunction Services Limited - India
- Romanian Commodities Exchange
- Deloitte Consulting - India
- European Bulk Services B.V. - Netherlands
- GN Power Mariveles Coal Plant, Philippines
- Manunggal Multi Energi - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Semirara Mining and Power Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Indo Tambangraya Megah - Indonesia
- Sree Jayajothi Cements Limited - India
- Petron Corporation, Philippines
- Makarim & Taira - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Cement Manufacturers Association - India
- Medco Energi Mining Internasional
- Bharathi Cement Corporation - India
- Bhushan Steel Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Directorate Of Revenue Intelligence - India
- PetroVietnam Power Coal Import and Supply Company
- Toyota Tsusho Corporation, Japan
- Xindia Steels Limited - India
- Ambuja Cements Ltd - India
- Sojitz Corporation - Japan
- Bahari Cakrawala Sebuku - Indonesia
- Indian Energy Exchange, India
- Coastal Gujarat Power Limited - India
- Uttam Galva Steels Limited - India
- The Treasury - Australian Government
- Mintek Dendrill Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Asmin Koalindo Tuhup - Indonesia
- LBH Netherlands Bv - Netherlands
- Neyveli Lignite Corporation Ltd, - India
- Holcim Trading Pte Ltd - Singapore
- Port Waratah Coal Services - Australia
- MS Steel International - UAE
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Videocon Industries ltd - India
- Aboitiz Power Corporation - Philippines
- Bukit Baiduri Energy - Indonesia
- Siam City Cement PLC, Thailand
- Singapore Mercantile Exchange
- Miang Besar Coal Terminal - Indonesia
- Intertek Mineral Services - Indonesia
- Mercator Lines Limited - India
- Wood Mackenzie - Singapore
- The University of Queensland
- SMC Global Power, Philippines
- Interocean Group of Companies - India
- Thai Mozambique Logistica
- CIMB Investment Bank - Malaysia
- Gujarat Mineral Development Corp Ltd - India
- The State Trading Corporation of India Ltd
- Meralco Power Generation, Philippines
- Banpu Public Company Limited - Thailand
- Kumho Petrochemical, South Korea
- Ministry of Mines - Canada
- Sarangani Energy Corporation, Philippines
- SMG Consultants - Indonesia
- Samtan Co., Ltd - South Korea
- Star Paper Mills Limited - India
- GVK Power & Infra Limited - India
- Jaiprakash Power Ventures ltd
- Jorong Barutama Greston.PT - Indonesia
- Larsen & Toubro Limited - India
- Posco Energy - South Korea
- Mercuria Energy - Indonesia
- OPG Power Generation Pvt Ltd - India
- Sical Logistics Limited - India
- Kaltim Prima Coal - Indonesia
- Marubeni Corporation - India
- Riau Bara Harum - Indonesia
- Kideco Jaya Agung - Indonesia
- Bukit Makmur.PT - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Global Business Power Corporation, Philippines
- India Bulls Power Limited - India
- Formosa Plastics Group - Taiwan
- Alfred C Toepfer International GmbH - Germany
- Electricity Authority, New Zealand
- GMR Energy Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sakthi Sugars Limited - India
- Tata Chemicals Ltd - India
- Jindal Steel & Power Ltd - India
- Vizag Seaport Private Limited - India
- Indogreen Group - Indonesia
- New Zealand Coal & Carbon
- Australian Coal Association
- Agrawal Coal Company - India
- Bhoruka Overseas - Indonesia
- Siam City Cement - Thailand
- International Coal Ventures Pvt Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Aditya Birla Group - India
- Standard Chartered Bank - UAE
- PTC India Limited - India
- Timah Investasi Mineral - Indoneisa
- Barasentosa Lestari - Indonesia
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