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Royalty increase would be another blow for Indonesian coal mines

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Report summary

The Indonesian government is considering hiking royalties for IUP mines from 3-7% of revenue to 13.5%. We expect such an increase will raise cash costs by 9% and wipe out 20% of value from IUP mines.  PTBA would be the worst affected of Indonesia's major producers with the value of the company's coal mines expected to decrease by more than US$1 billion. Ironically, PTBA is 65% owned by the Indonesian government. The rationale for increasing royalties is to boost government revenue from the...

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Table of contents

  • Executive summary
  • Government considering IUP royalty increase to 13.5%
  • Impact on Indonesian mines
  • Impact on companies
  • Impact on government revenue
  • Rationale and consequences
  • Economic assumptions

Tables and charts

This report includes 4 images and tables including:

Images

  • Change in coal portfolio valuations for IDX listed companies if IUP royalties increase to 13.5%
  • Total government take from Indonesia's coal industry

Tables

  • Possible royalty change
  • Impacts of possible royalty change

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