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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, 20 April 12
PANAMAXES LEAD DRY BULK MARKET TO HIGHER GROUND - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
A rebound of demand for smaller dry bulk carriers has led the industry’s benchmark, the BDI (Baltic Dry Index) above the 1,000-point mark for ...
Friday, 20 April 12
BUMA HAS PRODUCED 2.6 MILLION TONS OF COAL IN MARCH 2012
COALspot.com - BUMA has removed 28.0 million bcm (+6.4% YoY) of overburden in March 2012 while coal production was at 2.6 million tons (+1.3% YoY).
...
Thursday, 19 April 12
FRESH COAL SALES FROM JATENERGYS JONGKANG MINES
COALspot.com - Energy company Jatenergy Ltd (ASX code JAT) announced today that it had signed a contract for an 11,000 tonne coal sale due for shipm ...
Thursday, 19 April 12
HANDY - 'POSITIVE TREND', PANAMAX - 'A FIRMER TENDENCY', CAPESIZE - 'AGAIN NEGATIVE'
Handy
The positive trend from last week continued, with more cargoes entering the market. Skaw/Passero del fixed tick above USD 4000 for US Gulf di ...
Thursday, 19 April 12
WILLIS MARINE MARKET REVIEW FORECASTS ANOTHER DIFFICULT YEAR - WILLIS GLOBAL MARINE / HELLENIC SHIPPING
After an inauspicious start, 2012 could well be "another difficult and uncertain year for the maritime industry faced with the aftermath of the ...
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- Central Electricity Authority - India
- Deloitte Consulting - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Mercator Lines Limited - India
- Singapore Mercantile Exchange
- Kepco SPC Power Corporation, Philippines
- Posco Energy - South Korea
- Chettinad Cement Corporation Ltd - India
- Eastern Energy - Thailand
- Jaiprakash Power Ventures ltd
- Mercuria Energy - Indonesia
- Australian Coal Association
- Mintek Dendrill Indonesia
- Banpu Public Company Limited - Thailand
- Larsen & Toubro Limited - India
- Sarangani Energy Corporation, Philippines
- Commonwealth Bank - Australia
- Marubeni Corporation - India
- Gujarat Electricity Regulatory Commission - India
- Xindia Steels Limited - India
- Vizag Seaport Private Limited - India
- Coal and Oil Company - UAE
- Pendopo Energi Batubara - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Riau Bara Harum - Indonesia
- Indian Oil Corporation Limited
- Barasentosa Lestari - Indonesia
- Meralco Power Generation, Philippines
- Sical Logistics Limited - India
- Aditya Birla Group - India
- Manunggal Multi Energi - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Attock Cement Pakistan Limited
- Merrill Lynch Commodities Europe
- Petrochimia International Co. Ltd.- Taiwan
- Neyveli Lignite Corporation Ltd, - India
- Formosa Plastics Group - Taiwan
- Directorate General of MIneral and Coal - Indonesia
- Global Business Power Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- South Luzon Thermal Energy Corporation
- Uttam Galva Steels Limited - India
- Salva Resources Pvt Ltd - India
- Gujarat Sidhee Cement - India
- ASAPP Information Group - India
- Baramulti Group, Indonesia
- Interocean Group of Companies - India
- SMC Global Power, Philippines
- Semirara Mining and Power Corporation, Philippines
- Agrawal Coal Company - India
- PNOC Exploration Corporation - Philippines
- Karaikal Port Pvt Ltd - India
- International Coal Ventures Pvt Ltd - India
- Siam City Cement - Thailand
- Directorate Of Revenue Intelligence - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- Ministry of Finance - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Indo Tambangraya Megah - Indonesia
- London Commodity Brokers - England
- GVK Power & Infra Limited - India
- Timah Investasi Mineral - Indoneisa
- Kaltim Prima Coal - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Krishnapatnam Port Company Ltd. - India
- PTC India Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Indian Energy Exchange, India
- Parry Sugars Refinery, India
- Metalloyd Limited - United Kingdom
- Georgia Ports Authority, United States
- Anglo American - United Kingdom
- TeaM Sual Corporation - Philippines
- Binh Thuan Hamico - Vietnam
- Toyota Tsusho Corporation, Japan
- Medco Energi Mining Internasional
- GAC Shipping (India) Pvt Ltd
- Maheswari Brothers Coal Limited - India
- Savvy Resources Ltd - HongKong
- Latin American Coal - Colombia
- San Jose City I Power Corp, Philippines
- Star Paper Mills Limited - India
- Therma Luzon, Inc, Philippines
- New Zealand Coal & Carbon
- European Bulk Services B.V. - Netherlands
- PowerSource Philippines DevCo
- Vedanta Resources Plc - India
- Jindal Steel & Power Ltd - India
- Port Waratah Coal Services - Australia
- Samtan Co., Ltd - South Korea
- Malabar Cements Ltd - India
- Carbofer General Trading SA - India
- Thai Mozambique Logistica
- Indogreen Group - Indonesia
- Independent Power Producers Association of India
- Orica Australia Pty. Ltd.
- Ambuja Cements Ltd - India
- CNBM International Corporation - China
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- AsiaOL BioFuels Corp., Philippines
- Global Coal Blending Company Limited - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Bayan Resources Tbk. - Indonesia
- Goldman Sachs - Singapore
- Makarim & Taira - Indonesia
- Dalmia Cement Bharat India
- Edison Trading Spa - Italy
- Ministry of Transport, Egypt
- Energy Development Corp, Philippines
- Central Java Power - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Global Green Power PLC Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- Price Waterhouse Coopers - Russia
- Gujarat Mineral Development Corp Ltd - India
- Mjunction Services Limited - India
- SMG Consultants - Indonesia
- Africa Commodities Group - South Africa
- Tamil Nadu electricity Board
- Essar Steel Hazira Ltd - India
- Trasteel International SA, Italy
- Bukit Makmur.PT - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Bhatia International Limited - India
- Renaissance Capital - South Africa
- VISA Power Limited - India
- Eastern Coal Council - USA
- Petron Corporation, Philippines
- Videocon Industries ltd - India
- Bhushan Steel Limited - India
- Minerals Council of Australia
- Romanian Commodities Exchange
- Heidelberg Cement - Germany
- Wood Mackenzie - Singapore
- White Energy Company Limited
- Miang Besar Coal Terminal - Indonesia
- Thiess Contractors Indonesia
- Kapuas Tunggal Persada - Indonesia
- McConnell Dowell - Australia
- Sindya Power Generating Company Private Ltd
- Sinarmas Energy and Mining - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Indika Energy - Indonesia
- IHS Mccloskey Coal Group - USA
- Sree Jayajothi Cements Limited - India
- Planning Commission, India
- Chamber of Mines of South Africa
- Vijayanagar Sugar Pvt Ltd - India
- Kobexindo Tractors - Indoneisa
- Sojitz Corporation - Japan
- OPG Power Generation Pvt Ltd - India
- Standard Chartered Bank - UAE
- Siam City Cement PLC, Thailand
- ICICI Bank Limited - India
- Rashtriya Ispat Nigam Limited - India
- Kartika Selabumi Mining - Indonesia
- Electricity Generating Authority of Thailand
- Intertek Mineral Services - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Globalindo Alam Lestari - Indonesia
- Semirara Mining Corp, Philippines
- Parliament of New Zealand
- Electricity Authority, New Zealand
- Cement Manufacturers Association - India
- IEA Clean Coal Centre - UK
- SN Aboitiz Power Inc, Philippines
- Sakthi Sugars Limited - India
- Kumho Petrochemical, South Korea
- Borneo Indobara - Indonesia
- Grasim Industreis Ltd - India
- Bangladesh Power Developement Board
- Madhucon Powers Ltd - India
- Lanco Infratech Ltd - India
- LBH Netherlands Bv - Netherlands
- Australian Commodity Traders Exchange
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bulk Trading Sa - Switzerland
- Orica Mining Services - Indonesia
- Ministry of Mines - Canada
- Bhoruka Overseas - Indonesia
- The University of Queensland
- Indonesian Coal Mining Association
- Bank of Tokyo Mitsubishi UFJ Ltd
- Maharashtra Electricity Regulatory Commission - India
- Tata Chemicals Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- GMR Energy Limited - India
- Coalindo Energy - Indonesia
- The Treasury - Australian Government
- Meenaskhi Energy Private Limited - India
- Iligan Light & Power Inc, Philippines
- Kalimantan Lumbung Energi - Indonesia
- The State Trading Corporation of India Ltd
- Energy Link Ltd, New Zealand
- Straits Asia Resources Limited - Singapore
- Kideco Jaya Agung - Indonesia
- Oldendorff Carriers - Singapore
- Rio Tinto Coal - Australia
- Leighton Contractors Pty Ltd - Australia
- India Bulls Power Limited - India
- Coastal Gujarat Power Limited - India
- Economic Council, Georgia
- Bharathi Cement Corporation - India
- Ind-Barath Power Infra Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Altura Mining Limited, Indonesia
- Simpson Spence & Young - Indonesia
- CIMB Investment Bank - Malaysia
- MS Steel International - UAE
- Power Finance Corporation Ltd., India
- Alfred C Toepfer International GmbH - Germany
- Wilmar Investment Holdings
- Antam Resourcindo - Indonesia
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