Elements in Coal Trading

The Specs and quality of the Coal is really significant to be observed in trading Coal Products. You have to learn carefully from  the Coal Professional, when they are talking and discussing about the Calorie of the Coal. The Coal from Sumatera appears to be high grade ranging around 6.3 to 7.00. 

Stock pile of the Coal is really important to avoid delay in loading the Coal and  for the purpose of determining the Laycan or the time when you will ask the Ship to move or berth to the Terminal Port, for loading the Coal because you will be exposed with Demurage and Dead Freight from the Mother Vessel which will pass by the Buyer to us as the Seller.

If we agree with an FOB arrangement, and delay occurred  causing longer time for the agreed Loading time, this will result  additional cost to the Vessel for parking the Vessel  at the Port, whch will be passed to us by the Buyer of the Coal..  

To minimize the risk  you may try to request that your responsibility as the Seller in taking  the Coal Product is up to the Stock Pile, where you will ask part of payment be made by the Buyer when the Coal reached  the Stock Pile.  We have several experiences, where we are being exposed with Demurage and Dead Freight due to the delay on our part in meeting the agreed volume of Coal to be loaded to the Vessel during the Laycan, since there are certain level of the Quality /Spec Coal  which may reach the Rejection figure specified in the Coal Sales Contract .

As a Corporate Business lawyer involved in this situation we have to experienced upon the real reality occurring during the Loading and shipment of the Coal.    

As you may now, even though the Grade is below the agreed level, frequently the Buyers insist you to continue Loading the Coal Products to the Vessel, event though  Coal Spec reached the Rejection level shown in the Coal Sales Agreement , since it appears  there are always Buyers or Endusers who will  absorb such Coal products. 

However, it may be that since the Coal Product is blended, the Calories are being mixed resulting negotiation upon the adjustment price to the agreed Coal Price, is conducted after a while from the time  Shipment of the Coal had reached its destiny, in the sense that The Coal had been delivered by the Buyer to the Enduser, but adjustment of the Coal Price between the Seller and the Buyer had not been reached. .  

Well the above are some elements that we have to observe in dealing with Selling, Loading the Coal Products  experienced  during the Loading time of the Coal.

Jakarta 4th February 2011
Agung S.Suleiman.  

Challengging Oil Operations

Yes, here  I  am back in front of my computer, writing in by Blog AGUNGSS Business Lawyer Note. After having experienced Independent as an Independent  Business Lawyer for more than 12  11/2 Years since June 1998, I am now busy with Oil works and also Coal Mining Works.

The Oil Company which I am being assigned through Secondment by Saco Law  through its Holding Company,  is in the face of Commercial Production. It is really exiting since we are all busy in preparing the arrangements as to how to implement to  get the oil Production from below the Ground around 500 meters  to carry  and moved it  to the Terminal Port for lifting to the Tanker of the Buyers. Well, it is really interesting since, cash and funds are needed to transport and move such Crude Oil from the Oil  Field to the Terminal Port.   

Moving such oil can be done through pipeline facilities, however, funds are need to built such pipeline facilities. If we are intending to use existing pipeline of other Oil Companies in the Working area, in reality it  is not that easy since quality of the Oil which we are intending to flow through  such pipeline must meet the quality oil of the existing producing Oil Companies who are already using such pipeline facilities. 

The temperature of the oil has to be high with a certain degree of level so that the oil could still  move and being transported through such pipeline facilities. Bankers who are financing oil Companies needs to see the real oil products being actually sold to the Buyers.   

Bankers will only disburse a certain amount of funds needed by the Oil Company for the working capital and will only further disburse  if the Oil Companies can show the Oil Products really being sold to the Buyer at the Terminal Port of Point of Sales. 

Accordingly, there have to be business strategy by the Oil Company, as to how to show  the Bankers of the realization of such Sales of Oil. 

If the process of using the Pipeline facilities still needs a long time for realization, the alternative way out has to be made,  which among others are  by using Trucks to carry such Crude oil from the Oil Field to such Terminal Port.  There must also be Storage tankers needed  to store such Crude Oil before lifting  to the Tankers. 

This may initially be more costly compared to using the pipeline facilities. But since, we are competing with time to show the Bankers on the Sales of the Oil to the Buyers, we may than choose  using Trucks as the first priority action to be taken by Oil Companies who are in the early stage of growth. in building their Financial Strength.  

This is really challenging for us including fo the Oil Business Commercial Lawyer to prepare the required  contracts to stipulate the terms and conditions for implementing this business strategy.    

Good and Well Team work are needed to make these  challenges  become real and executable. We have to be professional  and  focused on the Goals and Priorities. These are really challenging operations experienced  by us involved  in the Oil Business Operations in Indonesia.

Cheers

Agung S.Suleiman

Jakarta 3rd  February 2011                 

Coal Trading Business

During this recent weeks, I have been really busy  involved in a team work  with our group members  relating to a certain Coal Trade  Project. It is really exiting, interesting and frustrating  because there seems to be difference of manners and attitude in approaching the price settlement  of Coal that had been loaded on the Vessel,  for approximately 15,000,000 MT of Coal. 

The issue was that the Coal Quality spec was not reaching the spec but was not rejected by the Purchaser, and requested to be loaded to the Vessel, with  conditions  proposed by the Purchaser that if the Coal is below  5500 Kcal/GAR, the price will be renegotiated. 

However, when we as  Seller had followed the instruction to load the Coal to the Vessel for shipment, the Purchaser seems not having room for negotiation, and had keep on insisting  to decide unilaterally, for which purpose we as the Seller who had followed the instructions of the Purchaser to load the Coal,  feels of not being treated fairly, which also resulted several of the stockholders, suffers delay in payment for their rendered services.

The Purchaser had requested that the pricing of the Coal must apply CV prorated basis plus discount of 20%, which resulted the figure far below the market price of the Coal. We as the Seller had moved our position from just applying prorated basis with discount to applying the market price. 

Well, in doing Coal Trading Business, we have to be professional and also have to honor the commitment that we had made. In practice even though the Sale and Coal Purchase Agreement  had been signed, if one of the Party   particularly the Purchaser had waived their rights to reject the Coal Commodity which had reached the rejection point, and requested to load the Coal immediately to the Vessel,  subsequently, such instructions has to be treated as a legal contractual binding commitments, for which  we have to honor our wordings made through such email,  which suggested for negotiation on the pricing of the Coal,  which in average had shown a certain Gross Caloric Value that had  been be determined by the Independent Consultant mutually agreed by the parties. 

There appears to be Coal Pricing Index,  where there are several Coal Kg Calorie  Value Indexes, where according to the Indonesian Mining Association News, Indonesia, one of the major Coal Exporter  through  PT. Coalindo Energi (PT CE), will soon launch the Indonesian Coal Mining Index ("ICI")  for example ICI 1 to 3 ranging from ICI 1 GROSS caloric Value GAR 6500 Kg Calorie, ICI 2 - 5500 Kg Calorie  and ICI  3 - 5000 Kg Calorie, where there is a range of pricing deduction, if it falls between these range index. From our brain storming discussions, it indicates that we may  have several alternatives /options to either apply (i) the prorate basis to get the pricing of the Coal or (ii) deducting a certain percentage, or (iii) we just  seek the market price of such average Coal Kg calorie on As Received Basis (ARB). 

As a Business Lawyer who is a member of  the Professional Coal Trading Team,  we really have to anticipate how if in the real practice there occurs, condition where the Quality of the Coal did not meet the required spec quality and rather had reached the rejection point but from the commercial basis,  the Purchaser had requested to waive its right to reject the Coal and insist on loading the Coal to the Vessel, but do not want to open its room for negotiation on the Price of the Coal that had been actually loaded to the Vessel ( FOB) and delivered to the Purchaser and had reached the End-user  .

The Rainy weather, must also be taken into consideration, since the Naught of the Vessel had to be closed to avoid flood of water causing The Total Moisture (TM) contents in the Coal Increase dramatically. 

One of the issues that also  have to be taken into consideration is relating to Demmurrage and Dead Freight issue, particularly if the Inventory of the Coal in the Stock Pile,  either within the Mining Location or in the Stock Pile in the Port is not sufficient in quantity, to fulfill the agreed amount  of Coal Bulk to be supplied,   which could cause Demmurrage and Dead Freight Exposures.     

Well, those are some of the issues that has to be anticipated in the real world of trading Coal for shipment.                      

Shareholder Loan

There are instances where a PT Limited Liability Company operating in Indonesia needs funds from its Shareholder. In this situation you as a Business Lawyer are being required to draft a  certain Shareholder Loan Agreement by your Client. If you are an In House Legal Counsel of such PT Company you may try to draft a first draft of such Shareholder Loan Agreement to be further reviewed by an Outside Lawyer. Click Here!

If there are several shareholders in such PT Company, there must firstly be a Shareholders Meeting  called  by the Board of Directors for a meeting with the agenda to request the shareholders to give such Shareholders Loan to the PT Company, where Minutes of the General Shareholders Meeting will be the legal basis  for the  Shareholders and the PT Company to enter into a Shareholder Agreement. As we understand under the Indonesian Limited Liability Company Law, the PT and its respective Shareholders are being treated respectively as an independent Law Subject in front of the Law.   Thus if the shareholder agreed to provide such Shareholder Loan, such Shareholder who are providing such Shareholder Loan has the right to demand for the repayment of the Shareholder Loan against the PT Company. S corporation shareholder loans: a cautionary tale.: An article from: The Tax Adviser

SUBORDINATE LOAN 

This Shareholder Loan has the level of subordinate Loan against Loan From a Bank made to such PT Limited Liability Company, meaning that if there is cash-in received by such PT from its business, the repayment has to be  firstly made by the PT  to the Bank and if there is remaining amount after being deducted for the operations of the PT Company such monies is allocated for the repayment to such Shareholder providing such Shareholder Loan to such PT Company.

This repayment to the Shareholder is also made first before dividend are distributed to the Shareholders. This all depends upon the agreement between the shareholders of the PT Company and the Shareholder who is providing such Loan. It is really interesting for a Business Lawyer to draft this Shareholder Loan Agreement since there are legal aspects of Civil Law regulating loan, and  there are Corporation PT Law regulating the corporation aspects of such PT, which have to be observed by the Business Lawyer in drafting the Shareholder Loan Agreement.      

   

Loan Agreements

If your Client needs some funds from a certain Financier, you may be requested to draft or review a Loan Agreement. In drafting this Loan Agreement there are several legal aspects that you have to draw your attention. You must know the amount of the Loan which your Client requires, the Disbursement of the Loan, and the Repayment of such Loan. In order to secure the Loan the Banks or Financier usually request a certain Independent Business Lawyer to conduct Legal Due Diligence to review several legal aspects that have to be observe to make sure that your Client is eligible to receive the Loan and will ask the purpose of your Client in requesting such Loan.      

Besides Legal Due Diligence, there may also be conducted the Financial Due Diligence for the purpose to review the Business Financial aspect relating to your Client Business. Is the purpose of such Loan for expansion of your Clients Business ? What is the project cash flow projections of your Clients Business.Who is the target market of your Client ? What is the market  share of your Clients selling products. Is your Client conducting business in Manufacturing a certain product ? Or is your Client conducting General Mining Business Operations ?

There are certain Bankers who looks at the reputation of your Clients Business. For instance if the Project is really feasible and your Client based on the Financial Records shows positive cash flows based on a certain Project that had been done by your Client, The Banker may trust your Client and provides a Project Financing arrangements, where the Banker is more focusing on the proven Cash in of the Projects in several projects that had been performed by you Client.   

If your Client has not yet shown Projects being performed, the Bankers may request several Corporate Assets of your Client such as Buildings, Plants, Machines, Heavy Equipments  as collateral  to secure the repayment of the Loan. As a Business Lawyer you need to review all the Legal aspects including the title ownership of such Corporate Assets.

The Bankers may also need to request some pledges upon the shares issued by your Clients Company. As  a Business Lawyer you need to review the Corporate Documents relating to the owner of the shares issued by your Clients Company.  Besides  reviewing the  Loan Agreements you may also need to draft or review  Collateral arrangements including the Fiduciary arrangements and probably may need to conduct checking with the Fiduciary Office relating the registering the Fiduciary Deeds.       

Business Legal Exposures Beef Restaurant Franchise Arrangements

In doing business you may be interested to enter into a business cooperation with another company who is mastering a certain business ventures that you are interested. For instances if you want to open a steak beef business Restaurant  you need to master all the conditions of the beef meat that you desire to serve in your Restaurant. You need to now the location of the place where your restaurant is going to be open. Is such place strategic or not. Are you intending to open a small or big Restaurant ? Where do you want to purchase such beef. Is it local beef or imported beef. 

Click Here!

If you feel that you want to use a famous beef Restaurant  that is already well known, you may be interested to enter into a Franchise Agreement with such well Known Beef Restaurant.  It really depends whether the owner of such well known brand is willing to allow you to use their brand in your Restaurant. If this is the case than you may need to observe the legal clauses under such Franchise Agreement. What are the rights that you have in using such well known brand, and what are the requirements that you need to comply as requested by the Owner name Brand  of such well Known Restaurant. It may be that the performance image of such Beef Restaurant including the conditions and cleanness of  your Restaurant must meet the standard  performance which is adopted by the Owner of the Well Known Beef Restaurant.

The Hygene and quality of the Foods and services have to be in accordance with the standard quality of Food as determind by the Owner of the Well Known Beef Restaurant. In fulfilling such above quality and standards you may need to redecorate your table, sits, Bathrooms, table cloth as well as the cleanest and standard dress  used by the Person who provide and serve such Beef Steak to  the  Customers and guests of your Restaurant all to be in the cost of you alone.  

The quality of the water may also be important to be observed. Who are the suppliers of the Beef Steak?. It may be that the Owner of the Brand will select the Supplier of such Beef Steak. The condition of the Kitchen as well as the Chef  may also be in accordance with the standard  requirements  as requested by the Owner of the well Known Beef Brand. Since this will be a Franchise arrangements there may be a certain Franchisee fee or Royalties that  you have to pay upfront to the Owner of the Franchise before they allow you to use their Beef Brand Restaurant.


This all depends upon the circumstances  and conditions surrounding the business transaction between you and the Owner of the Beef Brand Restaurant Owner. Well those are some of the business aspects which  have to be jotted down under the Franchise Agreement between you and the Owner of the Well Known Beef Brand Restaurant resulting legal binding contractual arrangements between you and the Beef Brand Owner.   

Writing Business Legal Aspects

Well, as Business Lawyer you like to write legal aspects relating to business in Indonesia.I ndonesia has been developing into a Democracy Society, where transparency and openness is a requirement to be performed by all the stake holders of this Country. Indonesia is an archipelago where there are many islands spread in the equator within the South East Asian Region. After the changing of the ruler of the previous former President Soeharto in the Year 1998, this country became a country in Asia where democracy is adopted. 

This transparency also spreads to the Business Sectors, where every person or party who wishes to conduct business in the Indonesian Territory  are given the same and fair chance to be a business player in the field of business. Anti Monopoly Act are being introduced in the Indonesian Law system.Good Corporate Governance are also being socialized in the Indonesian Business Community. During the Indonesian Economic Crisis in the Year 1998, many companies collapse due to the Economic Turbulence Crisis. Restructuring of the Non-Performance Loans had been made to revitalize the financial conditions of the Companies.

During  such period as a Business Lawyer we are experienced in helping our Clients to draft and negotiate the Restructuring Loan Agreements.  There were several  hair cut upon the Loan and rescheduling of the Repayment of the Loans. Now a  days  after the Indonesian Presidential Elections  and Vice President Elections as well as the Parliament elections were conducted, business society is waiting to experienced economic growth and business climate stability in order for the Business Players to start concentrating in pursuing their business.

The impact of the Indonesian  Parliament in controlling the Government is felt to be more of a political arena, where it could in a certain level affect the business condition in Indonesia. However, as a rule thumb of survival everybody needs to continue on their business ventures, where as individuals who are working as employees in Companies also needs stability in the Business Society to enable  them to work in their good quality performances.

In the Governmental Level in Indonesia, transparency and openness are also being required so that public services for the people as a whole including the business players who needs business  licenses and permits are simplified. The coordination between the Government Officials and policies in the Central Level and Regional Level are also required so that no contradictory policies are made which will affect the business investors conducting its business operation in the Regional Level.  

As a Business Lawyer, we are required to communicate and be the bridge for communication between our Business Clients and the Government Officers relating to the legals aspects and procedures involved in the business operations of our Clients. We have to read and observe the rules and policies in the Central Level and the Regional Level particularly to detect whether there occurs overlapping rulings and laws between the Central and such Regional Rules and Policies.    

Well those are some of the Business Legal Aspects that have to be observed and communicated effectively by the Business Lawyers to the Management of the Company where they work if they are In House Legal Counsel, as well as Business Lawyer on their own to their Clients.