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Friday, 23 December 11
CONTENTIOUS ISSUES IN CONTRACT RENEGOTIATION - THE JAKARTA POST
 The government has been renegotiating mining contracts, especially those 30-40 years old, with almost all mining companies, including PT Freeport Indonesia, which has been operating since 1967. This is a major step the government is taking and of course will affect the climate of mining investment in the future. If not carefully planned and executed, renegotiation might severely harm the prospects of the national mining industry.
That is why it is important for the government to choose the most important points to be brought to the negotiating table and to ensure that the results are beneficial to both sides, i.e., the mining enterprises and the government.
The basis for renegotiation is Law No. 4 /2009 on mining, which has changed the mining-concession regime by introducing a new licensing system. The law replaces mining authorizations (Kuasa Pertambangan or KP) as well as contracts of work (CoWs) and contracts of coal mining work (CCoW or PKP2B). The government acknowledges all CoWs/CCoWs that have been awarded before the law was promulgated; however all CoWs/CCoWs still need to be renegotiated.
The fundamental difference between the concession and licensing regimes lies in a number of points. Most important is the difference in the legal nature. While concession is based on civil law and the source of law is the agreement itself, licensing is public and legislation is the source of law. The application of a “concession” is the agreement between the two parties, the mining enterprises and the government, while a “license” is based on permission from the government.
In terms of rights and obligations, a licensing regime puts the government in a more dominant position. Settlement of disputes is through international arbitration for concession agreements but is via a state administrative court for licensing regimes.
These differences, of course, will be perceived differently by different mining enterprises. Large-scale mining companies and international enterprises prefer arbitration as a legal option, because arbitration is considered to be more fair and free from political intervention. Given that perception, the new regime is seen to generate potentially larger political risks.
Moreover, the bilateral nature of the contract system is believed to provide more protection against future changes in the law than a unilateral licensing system.
For small or national mining companies, however, licensing regimes might be seen to be friendlier as they provide equal opportunities to both domestic and foreign investors in applying for licenses.
Renegotiation is needed to adjust the content of contracts, which have been running since before the Mining Law came into being. These contracts need to be adapted to be in accordance with the new law. Renegotiation began in the fourth quarter of 2009 for CoWs and early 2010 for CCoWs.
Philosophically, however, renegotiation aims at restoring the country’s sovereignty over its natural resources as well as providing a better use of the resources for the people. This is reflected in a number of articles to adjust CoWs and CCoWs, to increase the added value for minerals and coal by imposing an obligation on contractors to establish downstream industrial facilities, to enhance state revenue through rate adjustments for royalties and production fees and to prioritize the use of local and national services.
Based on the notion of providing a better use of resources, a number of strategic issues are being brought to the negotiation table, such as the limitation of mining areas, contract extension, state revenue, divestment obligations for foreign investors that hold full-ownership in local mining firms, the obligation of processing and refining in the country’s smelters, as well as the obligations of the use of domestic goods and services.
As expected, the most prominent issue during the renegotiation is about the augmented state revenue — the first contentious issue. State revenue refers to mining taxes and profit-sharing schemes. The government is tightening tax regulations to enhance national revenue. This is the reason why the tax authority is involved in the renegotiation and assesses whether or not an enterprise is losing money.
Renegotiation on profit-sharing might not be necessary with those enterprises that are losing money. But the key point here is transparency — the enterprises must reveal their income — as the fundamental purpose of the renegotiation is for the results to be fair and transparent.
The limitation of mining areas is the second contentious issue. According to the law, all areas of work that exceed the maximum limit of 100,000 hectares (ha) for minerals and 50,000 ha for coal should be returned to the state. This has proven to be difficult, since most of the large mining enterprises have been working areas beyond this threshold. Freeport has a working area of up to 1.8 million ha, and Arutmin about 70,000 ha, and Inco about 180,000 ha.
The third contentious issue is extension of concession contracts. A concession contract is terminated when it expires. After that, the management must submit to the state, represented by state or local enterprises, a proposal to obtain a new mining license. Contract extension with the old contractor can be achieved only if the contractor is a minority shareholder.
These three issues are problems for both the government and the enterprises to resolve. Currently, there are about 113 plans to renegotiate mining contracts, of which 37 CoWs are in the mining of metals and minerals and 76 are contracts of coal mining work (CCoWs). The majority of the mining enterprises seem to be in the “Partially Agree” mode for CoWs and in the “Agree to All Amendment Articles” mode for CCoWS.
The results must be beneficial to both sides, promoting transparency and fairness. Mining has been contributing greatly to the country’s economy, as well as wealth to a number of mining enterprises. In 2010, mining accounted for about 11.15 percent of GDP for Indonesia overall, and a much higher percentage for provinces such as Papua, Bangka-Belitung, West Nusa Tenggara and East Kalimantan. Mining also accounted for 16.91 percent of Indonesian exports, providing Rp 9.7 trillion of government revenue.
But annual average mining investment is not growing as expected. Only in the coal sector has any large-scale new production capacity been developed in recent years. The vast majority of the investment is for the replacement of mining infrastructure to sustain capacity.
Given the long lead times to find and develop new mines, production declines will be inevitable unless the renegotiation can enhance transparency and the mining policy environment is improved.
We have to remember that the country has some of the most prospective geological areas and according to one international survey, only some areas of Canada and Australia have better mineral prospects. Thus, it is possible for mining to make a much larger economic contribution at the local, provincial and national levels.
The renegotiation process cannot be allowed to hinder this contribution. We have to avoid losing our competitiveness at a time when other countries are seeking new mining investment.
By: Montty Girianna
Source: The Jakarta Post
The writer is director for energy, mineral resources and mining at the National Development Planning Agency (BAPPENAS).
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Thursday, 08 December 11
HAREDA KRIDA GETS CONTRACT FROM BAYAN - INSIDER STORIES
Insider Stories reported that, coal miner PT Bayan Resources Tbk (BYAN), through its subsidiary dubbed PT Gunungbayan Pratamacoal (GPB), has signed ...
Thursday, 08 December 11
CAPESIZES LIFT DRY BULK MARKET - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
Capesize vessels yesterday helped lift the dry bulk market which had been falling since the start of the week on lower cargo demand. As a result the ...
Wednesday, 07 December 11
ABM INVESTAMA EYES RP6.3 TRIO REVENUE - INSIDER STORIES
Insider Stories reported that, an energy integrated company PT ABM Investama Tbk is eyeing a 1.5 folds increase in revenue this year from Rp4. ...
Tuesday, 06 December 11
DRY BULK MARKET ENDS RALLY, STARTS WEEK WITH FALL - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
After a series of increases which saw the dry bulk market’s benchmark, the Baltic Dry Index (BDI) increasing close to 1,900 points and rates o ...
Monday, 05 December 11
THE DECEMBER HBA FELL 11% FROM ITS PEAK AT US$127.05 PER TON IN FEBRUARY 2011
COALspot.com - Ministry of Energy and Mineral Resources of Indonesia has sets the December 2011 coal reference price at US$ 112.67 per ton US$ 3.98 ...
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Showing 4941 to 4945 news of total 6871 |
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- SMG Consultants - Indonesia
- Therma Luzon, Inc, Philippines
- LBH Netherlands Bv - Netherlands
- GAC Shipping (India) Pvt Ltd
- Anglo American - United Kingdom
- Kartika Selabumi Mining - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Edison Trading Spa - Italy
- Lanco Infratech Ltd - India
- Economic Council, Georgia
- Mintek Dendrill Indonesia
- International Coal Ventures Pvt Ltd - India
- Tamil Nadu electricity Board
- Bulk Trading Sa - Switzerland
- Formosa Plastics Group - Taiwan
- Uttam Galva Steels Limited - India
- Binh Thuan Hamico - Vietnam
- Aditya Birla Group - India
- Timah Investasi Mineral - Indoneisa
- Romanian Commodities Exchange
- Baramulti Group, Indonesia
- Malabar Cements Ltd - India
- Sakthi Sugars Limited - India
- Kobexindo Tractors - Indoneisa
- Makarim & Taira - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Ministry of Finance - Indonesia
- Thiess Contractors Indonesia
- Port Waratah Coal Services - Australia
- Pendopo Energi Batubara - Indonesia
- Iligan Light & Power Inc, Philippines
- Power Finance Corporation Ltd., India
- Savvy Resources Ltd - HongKong
- Ind-Barath Power Infra Limited - India
- SMC Global Power, Philippines
- Georgia Ports Authority, United States
- Global Green Power PLC Corporation, Philippines
- Bayan Resources Tbk. - Indonesia
- Indo Tambangraya Megah - Indonesia
- Riau Bara Harum - Indonesia
- Orica Australia Pty. Ltd.
- San Jose City I Power Corp, Philippines
- Larsen & Toubro Limited - India
- Orica Mining Services - Indonesia
- Minerals Council of Australia
- Xindia Steels Limited - India
- Dalmia Cement Bharat India
- Renaissance Capital - South Africa
- Semirara Mining and Power Corporation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Posco Energy - South Korea
- Interocean Group of Companies - India
- Bangladesh Power Developement Board
- Kaltim Prima Coal - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Indian Energy Exchange, India
- MS Steel International - UAE
- Bukit Asam (Persero) Tbk - Indonesia
- Bharathi Cement Corporation - India
- Siam City Cement - Thailand
- Australian Coal Association
- Latin American Coal - Colombia
- Ambuja Cements Ltd - India
- Altura Mining Limited, Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Manunggal Multi Energi - Indonesia
- Vizag Seaport Private Limited - India
- Leighton Contractors Pty Ltd - Australia
- The Treasury - Australian Government
- Karbindo Abesyapradhi - Indoneisa
- GN Power Mariveles Coal Plant, Philippines
- Chettinad Cement Corporation Ltd - India
- Rio Tinto Coal - Australia
- Goldman Sachs - Singapore
- Gujarat Electricity Regulatory Commission - India
- Eastern Coal Council - USA
- Jindal Steel & Power Ltd - India
- Energy Development Corp, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Semirara Mining Corp, Philippines
- PNOC Exploration Corporation - Philippines
- Medco Energi Mining Internasional
- Electricity Authority, New Zealand
- Australian Commodity Traders Exchange
- Global Coal Blending Company Limited - Australia
- Carbofer General Trading SA - India
- Neyveli Lignite Corporation Ltd, - India
- Agrawal Coal Company - India
- Pipit Mutiara Jaya. PT, Indonesia
- AsiaOL BioFuels Corp., Philippines
- TeaM Sual Corporation - Philippines
- Heidelberg Cement - Germany
- Chamber of Mines of South Africa
- ICICI Bank Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- White Energy Company Limited
- Borneo Indobara - Indonesia
- Barasentosa Lestari - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Bukit Makmur.PT - Indonesia
- Standard Chartered Bank - UAE
- Marubeni Corporation - India
- Sical Logistics Limited - India
- Kideco Jaya Agung - Indonesia
- Siam City Cement PLC, Thailand
- Meralco Power Generation, Philippines
- Commonwealth Bank - Australia
- Meenaskhi Energy Private Limited - India
- Oldendorff Carriers - Singapore
- McConnell Dowell - Australia
- Maheswari Brothers Coal Limited - India
- Ministry of Mines - Canada
- Merrill Lynch Commodities Europe
- Attock Cement Pakistan Limited
- PowerSource Philippines DevCo
- Parry Sugars Refinery, India
- Parliament of New Zealand
- Kohat Cement Company Ltd. - Pakistan
- Indian Oil Corporation Limited
- Straits Asia Resources Limited - Singapore
- Indogreen Group - Indonesia
- South Luzon Thermal Energy Corporation
- Vedanta Resources Plc - India
- Karaikal Port Pvt Ltd - India
- Planning Commission, India
- Sree Jayajothi Cements Limited - India
- Essar Steel Hazira Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bhoruka Overseas - Indonesia
- Madhucon Powers Ltd - India
- Mercator Lines Limited - India
- Global Business Power Corporation, Philippines
- Samtan Co., Ltd - South Korea
- Petron Corporation, Philippines
- Eastern Energy - Thailand
- Price Waterhouse Coopers - Russia
- Independent Power Producers Association of India
- Sindya Power Generating Company Private Ltd
- Indika Energy - Indonesia
- Sarangani Energy Corporation, Philippines
- Singapore Mercantile Exchange
- IHS Mccloskey Coal Group - USA
- Billiton Holdings Pty Ltd - Australia
- PetroVietnam Power Coal Import and Supply Company
- Directorate Of Revenue Intelligence - India
- Bhatia International Limited - India
- Ceylon Electricity Board - Sri Lanka
- Holcim Trading Pte Ltd - Singapore
- Electricity Generating Authority of Thailand
- Simpson Spence & Young - Indonesia
- GVK Power & Infra Limited - India
- IEA Clean Coal Centre - UK
- London Commodity Brokers - England
- Globalindo Alam Lestari - Indonesia
- PTC India Limited - India
- Banpu Public Company Limited - Thailand
- Coalindo Energy - Indonesia
- Videocon Industries ltd - India
- CIMB Investment Bank - Malaysia
- Sinarmas Energy and Mining - Indonesia
- Kumho Petrochemical, South Korea
- Salva Resources Pvt Ltd - India
- Kepco SPC Power Corporation, Philippines
- OPG Power Generation Pvt Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- ASAPP Information Group - India
- Tata Chemicals Ltd - India
- New Zealand Coal & Carbon
- Cement Manufacturers Association - India
- Krishnapatnam Port Company Ltd. - India
- Asmin Koalindo Tuhup - Indonesia
- Deloitte Consulting - India
- Star Paper Mills Limited - India
- Trasteel International SA, Italy
- GMR Energy Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- The University of Queensland
- Vijayanagar Sugar Pvt Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Mjunction Services Limited - India
- Antam Resourcindo - Indonesia
- CNBM International Corporation - China
- Kapuas Tunggal Persada - Indonesia
- Mercuria Energy - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Toyota Tsusho Corporation, Japan
- Metalloyd Limited - United Kingdom
- Coal and Oil Company - UAE
- The State Trading Corporation of India Ltd
- Coastal Gujarat Power Limited - India
- Sojitz Corporation - Japan
- India Bulls Power Limited - India
- VISA Power Limited - India
- SN Aboitiz Power Inc, Philippines
- Gujarat Sidhee Cement - India
- Indonesian Coal Mining Association
- Intertek Mineral Services - Indonesia
- Central Java Power - Indonesia
- Jaiprakash Power Ventures ltd
- Petrochimia International Co. Ltd.- Taiwan
- Africa Commodities Group - South Africa
- Energy Link Ltd, New Zealand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Wilmar Investment Holdings
- Central Electricity Authority - India
- European Bulk Services B.V. - Netherlands
- Wood Mackenzie - Singapore
- Cigading International Bulk Terminal - Indonesia
- Thai Mozambique Logistica
- Ministry of Transport, Egypt
- Grasim Industreis Ltd - India
- Bhushan Steel Limited - India
- Bukit Baiduri Energy - Indonesia
- Aboitiz Power Corporation - Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
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