The Impact of Coal Contract of Work (CCoW) Amendment on Mining Companies’ Financial Performance

A Case Study of Indonesian Mining Companies

DOI

10.2991/aebmr.k.201222.020How to use a DOI?

Keywords

coal contract of work amendment, financial performance, coal mining companies, production cost, companies’ profitability, 6 strategic issues

Abstract

The Government of Indonesia issued Law No. 4 of 2009 concerning Mineral and Coal Mining (Undang-Undang Nomor 4 Tahun 2009 tentang Pertambangan Mineral dan Batubara - UU Minerba) on 12 January 2009. This new mining law is to overrule the Law No. 11 of 1967 concerning Basic Provisions on Mining which was considered no longer compatible with the development of mining practices, both domestically or internationally. Article No. 169 of the new law cites that any existing Coal Contract of Work (CCoW) has to be in conformity with the new mining regulation within one year after UU Minerba is released. Accordingly, the Indonesian Government then called Indonesian coal mining companies operating under CCoW concession to amend their CCoW. At the beginning, the coal mining industry was not in favor of the CCoW amendment because it would change their underlying regulations for mining operations. It impacts their CCoW in 6 strategic issues: 1st. License for mining operation, 2nd. Domestic processing obligation, 3rd. Domestic purchase obligation for material and services, 4th. Divestment obligation, 5th. Size of area concession, 6th. State revenue. The CCoW amendment can create adverse impacts on Indonesian coal mining companies such as losing some privileges, damaging financial performance and creating uncertainty to their return to long investment. Therefore, presumption in the coal mining industry is that amendment CCoW has an unfavourable impact on their financial performance. These circumstances have been dragging the renegotiation of CCoW amendment since 2019 until end of 2017 and just enacted effectively since 1st January 2018. This research is to determine whether CCoW amendment has an unfavourable impact on Indonesian coal mining companies’ financial performance.

Copyright

© 2020, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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TY  - CONF
AU  - Aris Winarno Raharjo
AU  - Rofikoh Rokhim
PY  - 2020
DA  - 2020/12/23
TI  - The Impact of Coal Contract of Work (CCoW) Amendment on Mining Companies’ Financial Performance
BT  - Proceedings of the International Conference on Business and Management Research (ICBMR 2020)
PB  - Atlantis Press
SP  - 137
EP  - 143
SN  - 2352-5428
UR  - https://doi.org/10.2991/aebmr.k.201222.020
DO  - 10.2991/aebmr.k.201222.020
ID  - Raharjo2020
ER  -