November 14, 2017 / 12:34 PM / a year ago

UPDATE 2-Indonesia amends contracts with 13 coal mining companies

* Govt looking to boost revenue from coal sector

* Firms to pay 13.5 pct royalties on coal sales as a cash lump sum

* Mineral resources min hopes other firms will sign by year-end (Adds comment from Bumi)

By Wilda Asmarini

JAKARTA, Nov 15 (Reuters) - Indonesia has amended contracts with 13 coal mining companies, including some of the country’s biggest producers of the fossil fuel, as part of a shift towards a new mining permit system it expects to boost government revenues.

Indonesia’s 2009 mining law requires companies to transfer from so-called contracts of work, long-term agreements with specific rules including on taxes, to newer special mining permits that generally follow prevailing law.

The changes are intended to simplify regulation of the sector, but the transition has proven complicated and legally difficult with some companies, like U.S. giant Freeport, threatening international arbitration.

Among the coal miners that signed contract amendments at an event in Jakarta on Tuesday were PT Bumi Resources Tbk units PT Kaltim Prima Coal (KPC) and PT Arutmin Indonesia, as well as PT Berau Coal Energy Tbk and PT Kideco Jaya Agung.

Under the amendments, coal mining companies agreed to pay 13.5 percent royalties on coal sales as a cash lump sum.

The firms will be allowed to apply to extend their current contracts by up to two years.

Amendments for so-called ‘generation 1’ contracts of work also increase land rent to $4 per hectare from $1 per hectare previously, and will take effect immediately.

For later generation contracts used by companies including PT Barasentosa Lestari, PT Intitirta Primasakti, PT Juloi Coal, PT Kalteng Coal, PT Lahai Coal, PT Maruwai Coal, PT Pari Coal, PT Ratah Coal and PT Sumber Barito Coal, the changes come into effect in 2018.

Dileep Srivastava, a spokesman for Bumi Resources, Indonesia’s biggest coal miner by output, confirmed the contract amendments by the firm’s two subsidiaries, noting that Arutmin’s contract would expire in almost two years, while KPC’s contract is due to end in 2021.

Srivastava said the amendments were a precursor to “continued exploitation of our vast unmined reserves”.

A spokesman for Berau did not respond to a request for comment on the matter. A spokesman for PT Kideco Jaya Agung declined to comment.

According to Energy and Mineral Resources Minister Ignasius Jonan, the government expects an increase in state revenue of $68 million from the amendments.

There were still another 18 coal mining companies using contracts of work that had not yet signed amendments, Jonan said.

“I hope this year they are all completed.” (Reporting by Wilda Asmarini; Writing by Fergus Jensen; Editing by Louise Heavens, Mark Potter and Joseph Radford)

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