International Jatropha Conference

Bogor, June 24-26 2008

STRUCTURING INVESTMENT
OPPORTUNITIES
FOR
FOREIGN COMPANIES
IN THE
INDONESIAN JATROPHA INDUSTRY
Presented by:
William A. Sullivan
CHRISTIAN TEO & Associates
The Jakarta Stock Exchange Building
Tower II Floor 14 Suite 1405
Sudirman Central Business District
Jl.Jend. Sudirman Kav.52-53, Jakarta 12190
Tel: +62 21 515 0280
Email: bsullivan@cteolaw.com
 OUTLINE OF PRESENTATION
1. Hypothetical example
2. Onshore investment structure for
Indonesia
3. Onshore operating structure for Indonesia
4. Offshore ownership structure for
Indonesia
5. Recommended overall structure

International Jatropha Conference 2008 CHRISTIAN TEO & Associates

 HYPOTHETICAL EXAMPLE
1. ForeignCo needs long term CJO supply
2. Insufficient domestic CJO
3. IndonesiaCo has access to substantial land
areas suitable for growing Jatropha
4. IndonesiaCo lacks capital to develop
Jatropha plantation and produce CJO
5. ForeignCo and IndonesiaCo form JV to
develop Jatropha plantation and produce CJO
6. JV establishes JV ProjectCo to implement
Jatropha Project

International Jatropha Conference 2008 CHRISTIAN TEO & Associates

 ONSHORE INVESTMENT
STRUCTURE – PART I
Key Features of JVProjectCo
1. JVProjectCo must be PMA Company
2. Up to 100% foreign ownership
3. Minimum investment of US$0.8 Million
4. Debt to equity ratio of 3:1
5. Minimum paid up capital of US$200,000
6. Establishment time of 2-3 months

International Jatropha Conference 2008 CHRISTIAN TEO & Associates

 ONSHORE INVESTMENT
STRUCTURE – PART II
Control of JVProjectCo
ForeignCo controls JVProjectCo by means of:
1. Majority share ownership
2. Appointment of key management
3. Veto over major decisions
4. Long term CJO supply contract between
JVProjectCo and ForeignCo

International Jatropha Conference 2008 CHRISTIAN TEO & Associates

 ONSHORE
INVESTMENT STRUCTURE – PART III

ForeignCo

51%
Offshore JV Agreement
Indonesia

IndonesiaCo 49% JVProjectCo

(Non-PMA) (PMA)

Owner Operator

Jatropha Project
International Jatropha Conference 2008 CHRISTIAN TEO & Associates
 ONSHORE OPERATING
STRUCTURE – PART I
RESTRICTIONS

1. JVProjectCo treated as “foreign person”

for Land Law and Investment Law
purposes
2. JVProjectCo may not own land
3. JVProjectCo may not own Jatropha
Plants

International Jatropha Conference 2008 CHRISTIAN TEO & Associates

 ONSHORE OPERATING
STRUCTURE – PART II
TECHNICAL ASSISTANCE
ARRANGEMENT
1. IndonesiaCo appoints JVProjectCo as Project
Operator
2. JVProjectCo supplies the technical assistance
required for the Jatropha Project
3. JVProjectCo has the right to buy the Jatropha
Seeds when harvested
4. JVProjectCo processes the Jatropha Seeds into
CJO
International Jatropha Conference 2008 CHRISTIAN TEO & Associates
 ONSHORE OPERATING
STRUCTURE – PART III
BASIC OPERATING STRUCTURE-DIRECT LAND
OWNERSHIP
Offshore

Indonesia
JVProjectCo IndonesiaCo 100% Land and
(PMA) Jatropha
Plants
Operatorship

TAMC Jatropha Project

International Jatropha Conference 2008 CHRISTIAN TEO & Associates

 ONSHORE OPERATING
STRUCTURE – PART IV
BASIC OPERATING STRUCTURE-LAND LEASE
Offshore

Indonesia
Agricultural Lease
JVProjectCo Co-operative/ 100% Land and
(PMA) Participating Farmers/State Jatropha Plants

Jatropha Project

International Jatropha Conference 2008 CHRISTIAN TEO & Associates

 ONSHORE OPERATING
STRUCTURE – PART V
BASIC OPERATING STRUCTURE-CONTRACT
FARMING
Offshore

Indonesia
JVProjectCo IndonesiaC MOU Co-operative/ Participating 100% Land and
(PMA)
Farmers/State Jatropha Plants
o

Operatorship

TAMC Jatropha Project

International Jatropha Conference 2008 CHRISTIAN TEO & Associates

 ONSHORE OPERATING
STRUCTURE – PART VI
THIRD PARTY CONTRACTOR
Offshore

Indonesia
JVProjectCo IndonesiaCo 100% Land and
(PMA) Jatropha Plants

Sub-contract Operatorship
Arrangement
TAMC Jatropha Project
(with sub-contract right)

Sub-Contractor Physical Work

International Jatropha Conference 2008 CHRISTIAN TEO & Associates

 ONSHORE OPERATING
STRUCTURE – PART VII
MULTIPLE PROJECTS
Where the JV comes to include multiple Jatropha Projects,
there should be a separate JVProjectCo for each Jatropha
Project because :
1. Each CJO Project must be separately approved by
BKPM
2. Liability contagion between Jatropha Projects will be
eliminated
3. Accounting and record keeping will be simplified
4. Different revenue sharing arrangements are possible
5. Realization of exit strategies will be facilitated

International Jatropha Conference 2008 CHRISTIAN TEO & Associates

 ONSHORE OPERATING
STRUCTURE – PART VIII
SEPARATE OPERATING COMPANY FOR EACH JATROPHA
PROJECT
Offshore

Indonesia
JVProjectCo1 JVProjectCo2 JVProjectCo3
(PMA) (PMA) (PMA)
(etc)

Operatorship Operatorship Operatorship

Jatropha Project Jatropha Project Jatropha Project (etc)

No.1 No.2 No.3

International Jatropha Conference 2008 CHRISTIAN TEO & Associates

 OFFSHORE OWNERSHIP
STRUCTURE - PART I
OVERVIEW
1. ForeignCo establishes HoldingCo and
SPVCo in Singapore
2. SPVCo is wholly owned by HoldingCo
3. SPVCo holds ForeignCo’s interest in
JVProjectCo
4. Separate SPVCo for each JVProjectCo
5. Common HoldingCo for all SPVCos

International Jatropha Conference 2008 CHRISTIAN TEO & Associates

 OFFSHORE OWNERSHIP
STRUCTURE - PART II
ONE CJO PROJECT
ForeignCo
Offshore

100%

HoldingCo

100%

SPVCo
Singapore 51%

Indonesia
49%
JVProjectCo
IndonesiaCo
(PMA)

International Jatropha Conference 2008 CHRISTIAN TEO & Associates

 OFFSHORE OWNERSHIP
STRUCTURE - PART III
MULTIPLE CJO PROJECTS
ForeignCo
Offshore

100%

HoldingCo
100% 100%
100%

SPVCo1 SPVCo2 SPVCo3 (etc)

Singapore
51% 51% 51%

Indonesia
JVProjectCo1 JVProjectCo2 JVProjectCo3
(PMA) (PMA) (PMA) (etc)

International Jatropha Conference 2008 CHRISTIAN TEO & Associates

 OFFSHORE OWNERSHIP
STRUCTURE – PART IV
TAX CONSIDERATIONS
1. Tax Treaty between Singapore and Indonesia
2. Reduced Indonesian withholding tax on
dividends paid by JVProjectCo
3. No Singapore income tax on dividends
received by SPVCo from JVProjectCo
4. No Singapore withholding tax on dividends
paid by SPVCo or HoldingCo

International Jatropha Conference 2008 CHRISTIAN TEO & Associates

 OFFSHORE OWNERSHIP
STRUCTURE – PART V
BENEFITS
1. Minimum interface with BKPM
2. Disposal of individual CJO Projects made
easy
3. Future “spin-off” or IPO of HoldingCo and
all the SPVCos is facilitated
4. Tax effective in Indonesia and Singapore

International Jatropha Conference 2008 CHRISTIAN TEO & Associates

 RECOMMENDED OVERALL
STRUCURE – PART I
SUMMARY
1. PMA onshore investment structure
2. Separate operating company structure
3. Unconsolidated offshore ownership structure

International Jatropha Conference 2008 CHRISTIAN TEO & Associates

 RECOMMENDED OVERALL
STRUCTURE – PART II
ONE CJO PROJECT
Offshore
ForeignCo
100%

HoldingCo

100%

SPVCo
Singapore
51%

Indonesia
JVProjectCo
(PMA)

Operatorship

Jatropha
Project
International Jatropha Conference 2008 CHRISTIAN TEO & Associates
 RECOMMENDED OVERALL
STRUCTURE – PART III
MULTIPLE JATROPHA
PROJECTS
Offshore ForeignCo
100%

HoldingCo

100% 100% 100%

SPVCo1 SPVCo2 SPVCo3

Singapore (etc)
51% 51% 51%
Indonesia
JVProjectCo1 JVProjectCo2 JVProjectCo3
(PMA) (PMA) (PMA)
(etc)
Operatorship Operatorship Operatorship

Jatropha Project Jatropha Jatropha Project

No.1 Project No.1
International Jatropha Conference 2008
No.1 CHRISTIAN TEO & Associates
 RECOMMENDED OVERALL
STRUCTURE – PART IV
EVALUATION
1. Complies with Indonesia’s foreign
investment regime
2. Ensures no liability contagion between CJO
Projects
3. Provides maximum opportunity for full value
exit
4. Tax effective in Indonesia and Singapore

International Jatropha Conference 2008 CHRISTIAN TEO & Associates

 SUMMARY AND CONCLUSIONS
1. A viable and tax efficient legal structure
exists to facilitate foreign investment in the
Indonesian Jatropha industry

2. The interests of foreign investors in the

Indonesian Jatropha industry can be
adequately protected

International Jatropha Conference 2008 CHRISTIAN TEO & Associates

 Thank You

International Jatropha Conference 2008 CHRISTIAN TEO & Associates