Coal Sale Price For The Supply of Electricity For The Public Interest
To anticipate fluctuation of the Indonesia’s Coal Reference Price (Harga Batubara Acuan - HBA) which reached USD 101.86 per metric ton in March 2018 and significantly affect the production cost of Indonesian State Electricity Company (Perusahaan Listrik Negara – PLN), the Ministry of Energy and Mineral Resources (MEMR) enacted MEMR Decree No. 1395 K/30/MEM/2018 dated 9 March 2018 on the Coal Sale Price for the Supply of Electricity for the Public Interest (“MEMR 1395”).
The main point in the MEMR 1395 is the coal sale price for the supply of public electricity at USD 70 per metric ton free on board (FOB), with specification of the calories of 6,322kcal/kg GAR, total moisture of 8%, total Sulphur of 0.8%, and ash 15%.
In case of the prevailing HBA is equal to or greater than USD 70, the MEMR 1395 price of USD 70 shall apply. Otherwise, if the HBA is lower than USD 70, the calculation shall refer to the prevailing HBA. The formulations to calculate the coal sale price are provided in the attachment of the MEMR 1395.
HBA is updated on monthly basis and the latest version can be found in MEMR Decree Number 1812 K/30/MEM/2018 on Reference Prices for Coal and Metal Mineral of May 2018.
The MEMR 1395 point 4 stipulates the royalty that should be paid by the holder Operation Production Mining Business License (IUP OP), Specific Operation Production Mining Business License (IUPK OP), Coal Contract of Work (Perjanjian Karya Batubara). If the HBA is equal to or higher than USD 70, the royalty shall refer to the actual coal sale price (Harga Jual). Otherwise, the calculation shall refer to the Indonesian Coal Benchmark Price (Harga Patokan Batubara – HPB).
The Government of Indonesia shall provide an incentive for any coal producer in the form of a 10% increase of production if they fulfill the domestic market obligation as stipulated under MEMR Decree No. 23 K/30/MEM/2018. This Decree require 25% of total coal production to be distributed to domestic market before being imported.
In light of the maximum sale volume, the MEMR 1395 provides maximum of 100 million metric tons per year that is allowed to be supplied to the Indonesian State Electricity Company or other Independent Power Producers (IPPs).
Although the MEMR 1395 was initially intended to be applied retroactively from 1 January 2018, the MEMR later amend its effective date through MEMR Decree No. 1410K/30/MEM/2018 dated 12 March 2018 due to financial administration issue. Therefore, the MEMR 1395 shall take into effect as of 12 March 2018.