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.