Government revises coal price margin for mine mouth power plant

Minister of Energy and Mineral Resources Sudirman Said has issued new Ministerial Regulation No 9/2016, revising the price margin of coal dedicated for mine mouth power plant projects to 15-25 percent.

Under the previous regulation, the price margin is set at a maximum rate of 25 percent. Coal price dedicated for mine mouth power plants is set based on a formula of production cost plus margin.

Director General of Mineral and Coal at the ministry Bambang Gatot Ariyono said on Tuesday state-owned electricity company PT PLN and independent power producers are expected to accept the new regulation. He said that if coal producers and the two groups of buyers fail to reach agreement, the directorate holds the authority to intervene and set the final margin.

Head of PLN?s Coal Division, Harlen said that the company would follow the new regulation, although the company initially expected the margin to be set at maximum 10 percent in a bid to reduce electricity tariff and in light of the current drop in coal price. He added that the company would review the economic feasibility of the various coal mine mouth plant projects.

The move to revise the coal margin for mine mouth power plants come following calls from developers of mine mouth power plant projects for the government to reduce the margin to about 10 percent considering the current drop in coal price. Coal miners, however, had insisted for a 25 percent margin as a 10 percent margin would not be attractive for them to invest in the coal mining sector.

Bisnis Indonesia quoted Executive Director of the Indonesia Coal Mining Association (ICMA) Hendra Sinadia as saying that the new margin levels are acceptable to miners, and has been in line with the suggestion of the association. (*)