Banpu not worried about tax moves by Jakarta
Banpu is optimistic that its Indonesian mining operation will not be subject to an export tax on coal and other regulations that may come under review, such as foreign-ownership limits. Brokerages have also said Thailand's leading coal miner is quite saf
Somruedee Chaimongkol, Banpu’s chief financial officer, said yesterday that the company did not think the Indonesian government would return to levying an export tax on coal as the Indonesian Supreme Court in 2006 ruled that the 5-per-cent export tax was unconstitutional. However, if there is any way for the government to reimpose the tax, it will take years for it to come into force.
“As we’re still confident that the judgement of the Supreme Court will protect the coal industry in Indonesia, we’re not concerned that our costs in that country will go higher,” she said.
Regarding speculation that the Indonesian government is considering reviewing the law on foreign ownership, she said this was not the company’s concern either.
Indo Tambangraya Megah, Banpu’s arm for the coal business in Indonesia, was set up under the current investment law of that country, which allows 100-per-cent foreign ownership, so if any new regulation comes into force, it will not affect the company, Somruedee said.
Standard & Poor’s Ratings Services said last week that despite speculation that the mining-regulation revision might increase the cost of doing business in Indonesia over the next two years, Jakarta was not expected to impose extreme regulations. S&P retains its stable outlook for mining operators in the world’s largest coal-exporting country.
S&P said the importance of the coal industry to Indonesia’s economy was likely to protect it. The government will still provide good incentives to attract foreign investors to the coal business.
S&P’s report mentioned that the Indonesian government was considering increasing royalty rates and imposing additional tariffs for exports of unprocessed ore and coal. The new regulations may be enforced once the renegotiation of existing mining contracts is finalised. However, enforcement is likely to be delayed or toned down for the reasons it mentioned earlier.
Bualuang Securities said the revision of export tariffs was likely to focus on minerals such as copper, nickel and aluminium rather than coal because of the current shortfall for domestic consumption.
The brokerage is also confident that the export tax on coal will not be reinstated thanks to the Supreme Court’s ruling in 2006. Banpu faces only two tax obligations – corporate income tax of 30 per cent and royalties on sales of 13.5 per cent.
“According to these reasons, we don’t think that Banpu’s profitability will be dented,” the securities house said.
