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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, 01 March 12
INDO-INDIA, LARGE ECO SUPRA CAN FETCH CLOSE TO USD 9K DOP N.CHINA - FEARNLEYS AS
Handy
The Atlantic Handysize market did not see any signs for recovery this week. It is still a major lack of spot cargoes and an oversupply of pro ...
Wednesday, 29 February 12
69 MINERS AGREE TO RENEGOTIATE CONTRACTS - THE JAKARTA POST
The Jakarta Post, one of the leading English news papaer in Indonesia reported that, as many as 60 coal contracts-of-work (PKP2B) and nine non-coal ...
Wednesday, 29 February 12
PUTTING COAL GASIFICATION TO WORK
Clifford Reese of the SSOE Group looks at practical solutions for district energy leaders who wish to implement clean coal technology.
Coal fuels ...
Monday, 27 February 12
COAL MINING PROFITS TOO HIGH, SAYS GOVT - TEMPO INTERACTIVE
Tempo Interactive reported that, Energy and Mineral Resources Deputy Minister of Indonesia Widjajono Partowidagdo has criticized coal-mining compani ...
Monday, 27 February 12
INDONESIAN COAL EXPORTS TO CHINA DROPS 39.76 PERCENT IN JANUARY 2012
COALspot.com: Indonesia, the world largest coal exporter, shipped 28.21* mln mt of coal in January 2012, slightly lower than its December 2011 ...
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- Goldman Sachs - Singapore
- Alfred C Toepfer International GmbH - Germany
- Indika Energy - Indonesia
- Heidelberg Cement - Germany
- PetroVietnam Power Coal Import and Supply Company
- Kepco SPC Power Corporation, Philippines
- SMC Global Power, Philippines
- Dalmia Cement Bharat India
- Trasteel International SA, Italy
- Bank of Tokyo Mitsubishi UFJ Ltd
- CIMB Investment Bank - Malaysia
- Ceylon Electricity Board - Sri Lanka
- Coastal Gujarat Power Limited - India
- Orica Australia Pty. Ltd.
- Renaissance Capital - South Africa
- Singapore Mercantile Exchange
- Thai Mozambique Logistica
- Bhoruka Overseas - Indonesia
- Merrill Lynch Commodities Europe
- Malabar Cements Ltd - India
- Wood Mackenzie - Singapore
- Central Java Power - Indonesia
- Rio Tinto Coal - Australia
- Bukit Baiduri Energy - Indonesia
- Indo Tambangraya Megah - Indonesia
- Karaikal Port Pvt Ltd - India
- Altura Mining Limited, Indonesia
- Jindal Steel & Power Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Semirara Mining Corp, Philippines
- India Bulls Power Limited - India
- The Treasury - Australian Government
- Kobexindo Tractors - Indoneisa
- PTC India Limited - India
- Power Finance Corporation Ltd., India
- New Zealand Coal & Carbon
- Economic Council, Georgia
- Meralco Power Generation, Philippines
- Sakthi Sugars Limited - India
- Kapuas Tunggal Persada - Indonesia
- Samtan Co., Ltd - South Korea
- Borneo Indobara - Indonesia
- Timah Investasi Mineral - Indoneisa
- Sical Logistics Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- ASAPP Information Group - India
- Indian Oil Corporation Limited
- Attock Cement Pakistan Limited
- Central Electricity Authority - India
- Savvy Resources Ltd - HongKong
- Carbofer General Trading SA - India
- Indogreen Group - Indonesia
- Thiess Contractors Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Kaltim Prima Coal - Indonesia
- Therma Luzon, Inc, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Independent Power Producers Association of India
- Iligan Light & Power Inc, Philippines
- Makarim & Taira - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Indian Energy Exchange, India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Simpson Spence & Young - Indonesia
- Sojitz Corporation - Japan
- Latin American Coal - Colombia
- Ministry of Finance - Indonesia
- Chamber of Mines of South Africa
- The University of Queensland
- Straits Asia Resources Limited - Singapore
- Romanian Commodities Exchange
- IHS Mccloskey Coal Group - USA
- Bhushan Steel Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Kartika Selabumi Mining - Indonesia
- Orica Mining Services - Indonesia
- Mintek Dendrill Indonesia
- Ambuja Cements Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Intertek Mineral Services - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Kumho Petrochemical, South Korea
- Banpu Public Company Limited - Thailand
- Eastern Coal Council - USA
- Toyota Tsusho Corporation, Japan
- Kideco Jaya Agung - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Electricity Authority, New Zealand
- Ministry of Mines - Canada
- Energy Development Corp, Philippines
- White Energy Company Limited
- Manunggal Multi Energi - Indonesia
- San Jose City I Power Corp, Philippines
- Posco Energy - South Korea
- Planning Commission, India
- Deloitte Consulting - India
- Videocon Industries ltd - India
- Madhucon Powers Ltd - India
- Gujarat Sidhee Cement - India
- Formosa Plastics Group - Taiwan
- IEA Clean Coal Centre - UK
- Holcim Trading Pte Ltd - Singapore
- Mercator Lines Limited - India
- Georgia Ports Authority, United States
- Medco Energi Mining Internasional
- Siam City Cement PLC, Thailand
- Essar Steel Hazira Ltd - India
- Siam City Cement - Thailand
- Aditya Birla Group - India
- Globalindo Alam Lestari - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- AsiaOL BioFuels Corp., Philippines
- PowerSource Philippines DevCo
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Vedanta Resources Plc - India
- Parliament of New Zealand
- European Bulk Services B.V. - Netherlands
- Grasim Industreis Ltd - India
- Petron Corporation, Philippines
- Vizag Seaport Private Limited - India
- Ministry of Transport, Egypt
- Parry Sugars Refinery, India
- Mjunction Services Limited - India
- Interocean Group of Companies - India
- VISA Power Limited - India
- Binh Thuan Hamico - Vietnam
- Petrochimia International Co. Ltd.- Taiwan
- Jorong Barutama Greston.PT - Indonesia
- Tamil Nadu electricity Board
- Bukit Makmur.PT - Indonesia
- Global Coal Blending Company Limited - Australia
- Price Waterhouse Coopers - Russia
- CNBM International Corporation - China
- Bangladesh Power Developement Board
- Coal and Oil Company - UAE
- Sindya Power Generating Company Private Ltd
- Anglo American - United Kingdom
- LBH Netherlands Bv - Netherlands
- The State Trading Corporation of India Ltd
- Africa Commodities Group - South Africa
- Agrawal Coal Company - India
- Rashtriya Ispat Nigam Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Riau Bara Harum - Indonesia
- TeaM Sual Corporation - Philippines
- Aboitiz Power Corporation - Philippines
- GMR Energy Limited - India
- Krishnapatnam Port Company Ltd. - India
- Miang Besar Coal Terminal - Indonesia
- Sarangani Energy Corporation, Philippines
- Bhatia International Limited - India
- Maheswari Brothers Coal Limited - India
- London Commodity Brokers - England
- Indonesian Coal Mining Association
- Commonwealth Bank - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Coalindo Energy - Indonesia
- Bayan Resources Tbk. - Indonesia
- Lanco Infratech Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- McConnell Dowell - Australia
- PNOC Exploration Corporation - Philippines
- Energy Link Ltd, New Zealand
- Larsen & Toubro Limited - India
- Sinarmas Energy and Mining - Indonesia
- MS Steel International - UAE
- Eastern Energy - Thailand
- Uttam Galva Steels Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Meenaskhi Energy Private Limited - India
- GVK Power & Infra Limited - India
- Ind-Barath Power Infra Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Star Paper Mills Limited - India
- SMG Consultants - Indonesia
- South Luzon Thermal Energy Corporation
- Bharathi Cement Corporation - India
- Gujarat Mineral Development Corp Ltd - India
- International Coal Ventures Pvt Ltd - India
- Electricity Generating Authority of Thailand
- GAC Shipping (India) Pvt Ltd
- Global Green Power PLC Corporation, Philippines
- Metalloyd Limited - United Kingdom
- Edison Trading Spa - Italy
- Pipit Mutiara Jaya. PT, Indonesia
- Xindia Steels Limited - India
- Marubeni Corporation - India
- Vijayanagar Sugar Pvt Ltd - India
- Antam Resourcindo - Indonesia
- Mercuria Energy - Indonesia
- Bulk Trading Sa - Switzerland
- Wilmar Investment Holdings
- Oldendorff Carriers - Singapore
- Semirara Mining and Power Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- Standard Chartered Bank - UAE
- ICICI Bank Limited - India
- Billiton Holdings Pty Ltd - Australia
- Leighton Contractors Pty Ltd - Australia
- SN Aboitiz Power Inc, Philippines
- Sree Jayajothi Cements Limited - India
- Pendopo Energi Batubara - Indonesia
- Directorate Of Revenue Intelligence - India
- Chettinad Cement Corporation Ltd - India
- Barasentosa Lestari - Indonesia
- Minerals Council of Australia
- OPG Power Generation Pvt Ltd - India
- Baramulti Group, Indonesia
- Australian Commodity Traders Exchange
- Tata Chemicals Ltd - India
- Port Waratah Coal Services - Australia
- Jaiprakash Power Ventures ltd
- Cement Manufacturers Association - India
- Neyveli Lignite Corporation Ltd, - India
- Australian Coal Association
- Salva Resources Pvt Ltd - India
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