Agreement reached on KPC divestment

Agreement reached on KPC divestment

Moch. N. Kurniawan, The Jakarta Post, Jakarta

The central government and coal mining firm PT Kaltim Prima Coal
have reached an initial agreement on the price of the 51 percent
stake to be divested by the company, according to a senior
government official.

KPC is jointly owned by Anglo-Australian mining company Rio
Tinto and British-American oil and gas company BP.

Under the contract with the central government, they are
required to divest 51 percent of their stake in KPC after ten
years of operation. But, the divestment process faced a stalemate
for years due to the disagreement over the price.

"We reached a common understanding with all parties at the
meeting last night, and agreed on the price," director general
for geology and mineral resources Wimpy S. Tjetjep said on
Friday, but he was reluctant to provide figures.

Wimpy said both parties also agreed to give priority to the
East Kalimantan provincial administration to buy KPC's share.

According to him, the final agreement would be signed next
week and the East Kalimantan government had agreed to drop its
lawsuit against KPC to pave the way for closing the deal. The
province sued KPC late last year at the South Jakarta District
Court on charges of deliberately delaying the divestment process.

Isran Noor, assistant to the secretary of the East Kutai
regency and Sapta Putra Yadi, KPC's deputy director for
administration, confirmed that all parties had agreed with the
new terms.

The East Kutai regency in East Kalimantan, where KPC's huge
coal mine is located, has teamed up with the East Kalimantan
provincial government to bid for KPC's stake.

"We (the East Kutai and the East Kalimantan administrations)
agreed on the price of $889 million for KPC's 100 percent state
or $453 million for a 51 percent stake," he told The Jakarta
Post.

But another source said the meeting had valued the 51 percent
stake at $419 million.

Isran said both local governments would no longer dispute any
new price, as long as it was below $453 million, to speed up the
divestment process.

They previously demanded to take over 51 percent of KPC's
shares for $319 million.

Isran also confirmed that East Kalimantan would withdraw its
legal action against KPC.

Sapta said that despite the company's support of the deal, KPC
would announce its official stance after the agreement was
concluded.

"We can't disclose what has been agreed upon. We must read it
first before signing it," he told the Post.