The Government has determined the 2011 coal domestic market obligation (DMO) requirements based on the recently issued Minister Decree Number 2360.K. This regulation stipulates that:

  1. The forecast for domestic coal consumption in 2011 is 78.97 million tons;
  2. The forecast for domestic coal production in 2011 is 326.65 million tons;
  3. The minimum percentage of coal output allocated for domestic consumption is 24.17%; and
  4. The DMO requirement is applied to 42 coal contract of work companies, 1 state-owned company and 10 mining authority (kuasa pertambangan/KP)/mining license (ijin usaha pertambangan/IUP) holders.

The names of the coal mining companies that are subject to the 2011 DMO requirement is attached to this regulation. This requirement should be observed by designated coal companies or offshore parties dealing with any one of them. In particular, offshore buyers may wish to insert representations and warranties regarding compliance with this requirement in coal supply agreements to ensure that their supply is contractually independent from the DMO requirement.

O'Melveny & Myers LLP routinely provides advice to clients on complex transactions in which these issues may arise, including finance, mergers and acquisitions, and licensing arrangements. If you have any questions about the operation of the applicable statutory provisions or the case law interpreting these provisions, please contact any of the attorneys listed on this alert.

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