It has recently come to our knowledge that the Ministry of Energy and Mineral Resources (MEMR) is moving towards imposing mining companies holding IUP to build mine mouth coal power plant.
The purpose behind such imposition appears to be two folds. Firstly, the government official has told us that this is to encourage domestic sale and therefore suppress coal exports. It has been seen that the country is losing its coal resources due to the exportation.
Secondly, this requirement is to meet the growing domestic power demand. With the Indonesia’s economy merging, the growth for demand of electricity increase at 7% p.a. to 9% p.a. for foreseeable future.
MEMR has indicated that they would facilitate the construction of mine mouth power plant and also grant incentives to mining companies for constructing the mine mouth power plant.
With the proposed intention, coal trading companies focusing on export of coal will need to adjust its business as it will reduce the amount of coal available for export. And the countries that are relying on coal from Indonesia will need to get their supply from other locations.
We are yet to sight any draft regulation in this connection. We will monitor and provide updates to our clients should MEMR provide opportunity for public consultation on the draft regulation.