Coal price

The Minister of Energy and Mineral Resources of the Republic of Indonesia (“ MEMR ”) has issued Regulation of the MEMR Number 43 of 2018 (“ Regulation 43/2018 ”) which amends Regulation of the MEMR Number 09 of 2017 on Procedures for Shares Divestment and Mechanism for Determination of Divested Shares Price for Coal and Minerals-Mining Business Activities (“ Regulation 9/2017 ”). MR 43/8 has been in force since 25 September 2018.

Regulation 43/2018 revises a number of provisions relating to the following matters:

  1. Divestment Obligation;
  2. Divestment Procedures;
  3. Due Diligence Process; and
  4. Divestment Shares Price.

Divestment Obligation

Pursuant to Article 2 of Regulation 43/2018, foreign companies holding Mining Business Permit for Production Operation (Izin Usaha Pertambangan Operasi Produksi – “ IUP OP ”) or Special Mining Business Permit for Production Operation (Izin Usaha Pertambangan Khusus Operasi Produksi – “ IUPK OP ”) for over 5 (five) years since production activity shall divest its shares gradually so that in the 10th (tenth) year as of production activity, Indonesian parties will hold at least 51% of total shares ( “ Divestment Obligation ”). The Divestment Obligation is exempted for IUPK OP holder of processing and/or refinement.

The minimum percentage of shares to be divested each year in Divestment Obligation is as follows:

a. 20% in the sixth year of production activity;
b. 30% in the seventh year of production activity;
c. 37% in the eighth year of production activity;
d. 44% in the ninth year of production activity; and
e. 51% in the tenth year of production activity

Please note that Regulation 43/2018 now authorizes divestment of shares to be conducted through issuance of new shares and/or transfer or sale of existing shares, either directly or indirectly. This provision was not previously regulated under Regulation 9/2017.

Divestment Procedures

IUP OP and IUPK OP holders are obliged to offer shares to indonesian parties within 90 (ninety) calender days after the 5th (fifth) year production period ends with the following order:

  1. Central Government;
  2. Regional Governments (Pemerintah Provinsi dan Pemerintah Kabupaten);
  3. State-owned enterprises and regionally-owned enterprises (“ BUMN and BUMD ”); and
  4. National Private Business Entities.

Central Government through the MEMR then evaluate and negotiate the price of divested shares within 90 (ninety) calender days after receipt of an offer from IUP OP or IUPK OP Holder. The MEMR may also appoint an independent appraiser in order to evaluate the relevant offered price.

Previously, in case of disagreement emerging in relation to divested shares price, Regulation 9/2017 stipulates that divested shares price shall be calculated based on evaluation conducted by the Minister. This provision, however, has no longer been inserted into Regulation 43/2018.

In addition, in order to increase the effectiveness in divestment of shares, Central Government via Minister in expressing its intention to take over the offered shares may involve regional governments, BUMN and/or BUMD in all at once (“ Cooperation ”). This Cooperation will determine the relevant divestment scheme as well as composition of divested shares. In Regulation 43/2018, the Cooperation is also authorized to establish or appoint a special purpose vehicle which will purchase the divested shares.

Due Diligence Process

Article 10A of Regulation 43/2018 stipulates that in the Divestment Obligation, foreign companies holding IUP OP and IUPK OP shall grant access to Indonesian parties to undertake due diligence process. This provision was previously not regulated under Regulation 9/2017.

Divestment Shares Price

Article 14 of Regulation 43/2018 stipulates that divestment shares price of IUP OP or IUPK OP holder offered to indonesian parties is calculated based on fair market value. Calculation of fair market value shall be conducted through the following methods:

  1. Discounted cash flow for economic benefits during the period of divestment until the end of the validity period of IUP OP or IUPK OP; and / or
  2. Market data benchmarking.

The abovementioned methods were previously not regulated under Regulation 9/2017.


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Dendi Adisuryo

Liza Mashita

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This publication has been prepared by Aditya Yudhistira for general informational purposes only to provide clients with information on recent legal developments and is not intended as legal advice or opinion.