Government proposed to increase coal mining royalty rate to 10%

Coal Sector:  Government seek to increase royalty up to 10%  (Under weight)

Royalty up to 10% for IUP holder.  Kontan daily today reported that the head of fiscal policy (BKF), Mr Bambang Brodjonegoro, has proposed to parliament to increase coal mining royalty rate to 10% vs current rate which varies from 3% - 7% subject to caloric value of the coal for IUP holder (based on PP No 9/2012). But it also need to be coordinated with Ministry of energy and resources (ESDM). From the Indonesia coal association (APBI) perspective, Mr Bob Kamandanu as the Chairman, suggest that if the proposal approved by the parlement, it should be implemented only for coal quality above 6,100kcal/kg as most of the low rank coal producers currently are suffering  from depression.

This is not a new surprise as the noise has been sounded last year. It is still a premature stage to speculate the impact to our coal universe due to political issue until we see the final regulation signed. However, if this proposal approved to implement across the board of coal qualities (low to high end rank), the bigger losers will be ABMM (Not Rated). While ADRO (Sell, TP: Rp1,000) partially affected for its recent M&A include MIP and BEP coal assets (as their main future volume growth drivers). While for PTBA (Neutral, TP: Rp16,500)  as an IUP holder is more on a grey area.

for Indonesia Market Summaries 30 May 2013