Rains affect KPC coal production<\/p>\n
By Wachyudi Soeriaatmadja<\/p>\n
SANGATA, East Kalimantan (JP): PT Kaltim Prima Coal (KPC), one
\nof the country's major coal producers, might not be able to meet
\nits production target of 15 million tons this year due to heavy
\nrains during the first half of the year, according to one of the
\ncompany's senior officials.<\/p>\n
Export and Logistics Superintendent Herlan Siagian said heavy
\nrains had affected the company's operations, especially those
\nrelated to the transportation of coal deposits from mines to the
\npreparation plant.<\/p>\n
\"As the result, our total production for 1999 will be only
\n14.5 million tons -- half a million tons short of the targeted 15
\nmillion,\" he told journalists visiting the company's mine here
\nlast week.<\/p>\n
The company produced 14.7 tons of coal last year.<\/p>\n
Coal is crushed into desirable sizes and\/or washed at the
\npreparation plant prior to shipment.<\/p>\n
Herlan said the lower than projected production was still
\ntolerable and it would not affect the company's exports, as most
\nof the orders were made on long-term purchase contracts.<\/p>\n
The company has long-term purchase contracts with most of its
\ncustomers, but the pricing of the coal as stipulated in each
\ncontract is subject to renegotiation every year.<\/p>\n
\"Some purchase contracts last for 10 years, but every year we
\nhave to renegotiate allowing for changing coal prices,\" he said
\nadding that the price renegotiation was conducted early in the
\nyear and was effective for the whole of that year.<\/p>\n
He declined to state the price KPC charged its customers for
\nthe coal purchased.<\/p>\n
But he said KPC -- like other major international coal
\nproducers -- referred to the most widely used coal price
\nreference, the \"Japanese benchmark\", for its pricing policy.<\/p>\n
He said that using this benchmark the current average world
\ncoal price was hovering below US$20 per ton, compared to about
\n$30 per ton early this year.<\/p>\n
The cost of producing coal in Indonesia stands at about $13 to
\n$14 per ton, according to a source familiar with the Indonesian
\ncoal mining industry.<\/p>\n
\"The coal price has been consistently decreasing since 1990
\nwhen the price was $50 per ton,\" Herlan said.<\/p>\n
He attributed the low price mainly to weaker demand and the
\nworldwide economic recession.<\/p>\n
\"Many power plant projects in developing countries in Asia and
\nSouth America have been put on hold due to the economic crisis.
\nThese power plants were set to use coal as their energy source,\"
\nhe said.<\/p>\n
He said however that with the company's long-term purchase
\ncontracts, KPC's target for next years production was still the
\nsame as this year, 15 million tons.<\/p>\n
He was confident that the coal price would rise in line with
\nsigns of economic recovery in most crisis hit Asian countries.<\/p>\n
KPC exports practically all of its coal, with Asian countries
\naccounting for 84 percent of the total sales last year.<\/p>\n
\"Only a small amount is sold to the domestic market; the gold
\nand copper mine PT Freeport Indonesia in Irian Jaya is our single
\ndomestic buyer,\" he said.<\/p>\n
Last year KPC sold its coal to Taiwan (37 percent), Japan (32
\npercent), other Asian countries (15 percent), European countries
\nincluding Israel (11 percent) and the United States (5 percent).<\/p>\n
He said that only one shipment had been delayed; to Taiwan due
\nto the earthquake in the country.<\/p>\n
\"Most of the shipments to Taiwan for this year were sent
\nbefore the earthquake,\" he said.<\/p>\n
Besides placing hopes in the economic recovery of the mainly
\nAsian countries, Herlan also saw the steady high gas and oil
\nprices as a positive sign of improving coal prices in the future.<\/p>\n
\"The high gas and oil prices will make the market switch to
\nusing coal. This will a mean higher demand for coal, which will
\nin turn push the coal price up,\" he said.<\/p>\n
Divestment<\/p>\n
Asked about the company's preparation for fulfilling the
\ngovernment's mandatory divestment requirement, KPC's Commercial
\nGeneral Manager Graham Taggart said that such a divestment plan
\nwas still in the negotiation stage.<\/p>\n
Taggart declined to comment on the progress of the negotiation
\nwith the government, saying that it was the shareholders' job to
\ncomment on such a matter.<\/p>\n
\"Rio Tinto (one of KPC's shareholders) will hold a press
\nconference in Jakarta next Wednesday to explain the divestment
\nplan,\" Taggart said.<\/p>\n
KPC is owned by Anglo-Australian mining firm Rio Tinto and
\nUnited Kingdom-based BP Amoco PLC. It is required to divest up to
\n51 percent of its stake to local investors according to its 1982
\ncontract.<\/p>\n
The first-generation 1982 mining contract stipulated that KPC
\nwas to gradually divest a 51 percent stake to local investors,
\nbeginning five years after it began commercial operations in
\n1992.<\/p>\n
However, KPC secured permission from the government in 1997 to
\ndelay the divestment until early this year. Currently, the
\ncompany must divest 30 percent of its stake to a local company.<\/p>\n
The divestment has still not materialized because of
\ndisagreement over the share price between the government and
\nKPC's current shareholders.<\/p>\n
Early this month the government told KPC to complete talks on
\nits 30 percent divestment plan by the end of this month or face a
\npenalty.<\/p>\n
Previously there were two investors interested in KPC: the
\nmining company PT Tambang Timah and the local administration of
\nEast Kalimantan, the province in which KPC operates.<\/p>\n
Rio Tinto representative Phillip Strachan earlier stated that
\nKPC was awaiting the completion of a valuation process by an
\nindependent appraisal company before considering any investors.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/rains-affect-kpc-coal-production-1447893297",
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