From Government of Indonesia

Foreign Funds to Drive Coal Growth

The coal sector needs foreign investment to expand its operations and a boost could come if new licensing regulations and other measures are approved, according to the head of the country's coal association.

Investors are needed if Indonesia is to maintain output growth, Dow Jones Newswires quoted Jeffrey Mulyono, chairman of the Indonesian Coal Mining Association, as saying.

A lack of new money coming in due to uncertainties about investment policies had prompted the government into action, he said, noting that new regulations on mining licenses are due to be passed soon and a series of preferential measures are being planned.

"We can expect more and more foreign investors to come," Mulyono said in a recent interview, after attending the Coal Markets 2007 conference in Singapore.

"The new laws will give regional governments the right to decide whom they are going to invite to invest in their areas, regardless it's foreign or domestic," he said.

Other measures will also be rolled out. The government plans to cut royalties for low quality coal from to 7-9% from the current 13.5%, and the plan "will be announced by the government soon," he said.

Mulyono noted strong interest from both China and India, with some Indian operators already working in the country.

India’s Reliance Energy Ltd and Tata Power have confirmed they are both aiming to take a 30% stake in Bumi Resources, Indonesia's largest coal producer and exporter, The Times of India reported.

Others reported to be interested in the stake are Mitsubishi Corporation, South Korean power company Kepco and a Glencore subsidiary.

Sources cited by the daily said the five players have been short-listed for the final round of bidding where the reserve price has been fixed at close to $1 billion. Reliance decided to join the bidding to provide guaranteed supplies of coal for its power plants.
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