18
Oct2021

The Organization of The Energy and Mineral Resources Sector (Government Regulation Number 25 of 2021)

Indonesian Government issued Government Regulation No. 25 of 2021 (GR 25/2021) as an implementing rule of Law No. 11 of 2020 on Job Creation that amend numbers of provisions and one of them in energy and mineral resources sector. This summary exists to help understanding GR 25/2021.

 

Imposition of a 0% Royalty

Holders of mining business license for production operations, IUPK for production operation and IUPK as a Continuation of Contract/Agreement Operations for coal commodities that carry out Enhancement of the Added-Value of Coal domestically may be given certain treatment in the form of the imposition of a 0% (zero percent) royalty. The imposition can be given under following conditions:[1]

  1. Considering energy independence and the fulfillment of industrial raw material needs.
  2. Imposed on the volume of coal used in activities for Enhancement of the Added-Value of Coal.
  3. Further provisions on activities for the Enhancement of the Added-Value of Coal, the amount, requirements, and procedures for the imposition as referred to in paragraph (1) and paragraph (2) will be regulated by a Regulation of the Minister and previously have to receive an approval by a Minister of Finance.

 

Geothermal Business Activities

Geothermal business activities can be understood as follows:

  • Starting activities

The holders of IPB must start the activities as stated in the project development proposal submitted at the time of the Auction within a maximum period of 1 year form the date of the stipulation of an IPB. In the event that holders of IPB do not start the activities as referred to in paragraph (1) it shall be subject to an administrative sanction in the form of a written warning by the Minister.[2]

  • Exploration and Exploitation Activities

Holders of an IPB are required to carry out an Exploration within a certain period of time in its Working Area in the event that an Exploration has never been carried out in said Working Area.[3] Furthermore, within the Exploration period as referred before, holders of IPB are required to carry out a Feasibility Study.[4] IPB holders that does not carry out these obligations can be subject to administrative sanctions in the form of a written warning or temporary suspension to some or all activities if the third written warning period ends.[5]

  • The expiration of IPB

In the event of IPB has expired, IPB holders must:[6]

  1. pay off and settle all financial obligations in accordance with the provisions of laws and regulations;
  2. return the entire Working Area and implement all stipulated provisions relating to the return of the entire Working Area;
  3. submit all Geothermal Data and Information in the Working Area, both in analog and digital form relating to the implementation of Geothermal exploitation to the Minister; and
  4. carry out obligations after the IPB expires.

IPB holders have a number of obligations. The obligations are:[7]

  1. understand and comply with laws and regulations in the sectors of occupational safety and health as well as environmental protection and management and fulfill the applicable standards;
  2. control environmental pollution and/or damage which include activities to prevent, overcome and restore environmental functions;
  3. carry out Exploration, Exploitation, and utilization in accordance with good and correct technical principles;
  4. prioritize the utilization of domestic goods, services, technology, engineering and design capabilities in a transparent and competitive manner;
  5. provide support for research and development of science and technology in the Geothermal sector;
  6. provide support for the creation, Competency development, and human resource development in the Geothermal sector;
  7. carry out local community development and empowerment programs;
  8. organize bookkeeping or recordation by taking good faith into account and reflecting the actual condition or business activity;
  9. submit written reports of Geothermal exploitation to the Minister periodically for:
    1. work plan and budget; and
    2. realization of the implementation of work plan and budget;
  10. fulfill obligations in the form of state income and regional income in accordance with the provisions of laws and regulations;
  11. submit long-term Exploration, Exploitation and utilization plans to the Minister which includes activity plans and budget plans as well as submitting the amount of reserves;
  12. prioritize the use of the Indonesian workforce; and
  13. encourage the development of Direct Use of Geothermal in its Working Area.

Despite having obligations, Business entities and IPB holders also have some prohibitions and subject to administrative sanctions. The prohibitions are:

  1. Conduct geothermal exploitation indirectly without having IPB in advance;[8]
  2. Conduct geothermal exploitation indirectly that is not in accordance with its designation;[9]
  3. Transfers their IPB to other business entities;[10]
  4. Transfer the ownership of shares in Indonesia Stock Exchange before Exploration without the approval of the Minister.[11]

 

Electrical Power

Provision of electricity is carried out in 2 (two) types, namely:

  • Electrical power in the public interest

The implementation of the Electricity supply Business in the public interest shall be in accordance with the national General Electricity Plan and the Electricity Supply Business plan.[12]

Electricity Supply Business in the public interest includes the following types of business:[13]

  1. Electricity Generation;
  2. Electricity Transmission;
  3. Electricity Distribution; and/or
  4. sales of electricity.
  5. Electrical power for personal interest

Electricity Supply Business for personal interest with a total power plant capacity of more than 500 kW (five hundred kilowatt) connected in 1 (one) Electricity Installations system must obtain an Electricity Supply Business license for personal interest granted by the Minister or governors.[14] Meanwhile, the obligation of the Electricity Supply Business license for personal interest with a total power plant capacity of up to 500 kW (five hundred kilowatt) connected in 1 (one) Electricity Installations system is in the form of submission of 1 (one) report to the Minister or governor before operating Electricity Supply Business for personal interest.[15]

 

DISCLAIMER:

Any information contained in this Article is provided for informational purposes only and should not be construed as legal advice on any subject matter.  You should not act or refrain from acting on the basis of any content included in this Legal Update without seeking legal or other professional advice.  This document is copyright protected. No part of this document may be disclosed, distributed, reproduced or transmitted in any form or by any means, including photocopying and recording or stored in a retrieval system of any nature without the prior written consent of SIP Law Firm.

 

 

[1] Art. 3 GR 25/2021

[2] Art. 6 GR 25/2021

[3] Art. 8 (1) GR 25/2021

[4] Art. 8 (2) GR 25/2021

[5] Art. 8 (4) GR 25/2021

[6] Art. 17 (1) GR 25/2021

[7] Art. 18 (1) GR 25/2021

[8] Art. 4 GR 25/2021

[9] Art. 5 GR 25/2021

[10] Art. 14 GR 25/2021

[11] Art. 15 GR 25/2021

[12] Art. 23 (1) GR 25/2021

[13] Art. 26 (1) GR 25/2021

[14] Art. 27 (1-2) GR 25/2021

[15] Art. 27 (4) GR 25/2021

 

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