New rules for geothermal production bonuses

On 23 March 2017, Indonesia’s Ministry of Energy and Mineral Resources enacted Regulation No. 23 of 2017 on the Procedure for the Reconciliation, Depositing and Reporting of Geothermal Production Bonuses.

The regulation applies to holders of geothermal business licences (i.e., holders whose concession is granted under the licence-based concession, pursuant to Law No. 21 of 2014 on Geothermal – or geothermal licence holders) as well as holders of geothermal utilization authorizations, geothermal joint utilization contracts, and geothermal utilization licences (i.e., holders whose concession is granted under previous geothermal regimes – or geothermal concession holders). Collectively these are geothermal businesses.

PRODUCTION BONUS

A geothermal production bonus is one of the payment obligations imposed on geothermal businesses, paid to regional governments where geothermal work areas are located.

The production bonus amount is calculated based on the sale of geothermal steam and/or electricity generated from geothermal energy. The applicable rates are as follows:

1. 1% of gross income from the sale of geothermal steam, calculated by multiplying the sold geothermal steam (calculated in kwh-equivalent) by its sale price; or
2. 0.5% of gross income generated from the sale of electrical power. The relevant gross income is to be calculated by multiplying the amount of produced electrical power (in kilowatt hours) sold by its sale price.

Payment obligation of a production bonus becomes calculable:

1. For geothermal licence holders as of the first commercial production see article 3(1) of the regulation; and
2. For geothermal concession holders see article 3(2): (i) As of 1 January 2015, for holders in commercial operation prior to Law No. 21 of 2014 coming into force; and (ii) As of the commercial production of the first geothermal unit for holders not yet in commercial operation prior to Law No. 21 coming into force.

Under article 2 (1), geothermal businesses are required to submit an annual geothermal production and sales plan, including a production bonus forecast. The forecast production bonus is calculated based on 1% of gross geothermal sales and/or 0.5% of electricity sales, as mentioned above.

Abdul Haris Muhammad Rum is a partner at Lubis Ganie Surowidjojo and Chandra Karina is a senior associate at the firm