Bapepam orders Bumi to disclose KPC deal

Fitri Wulandari The Jakarta Post Jakarta

The Capital Market Supervisory Agency (Bapepam) has required publicly listed mining firm PT Bumi Resources to disclose details to the public about its planned acquisition of coal mining giant PT Kaltim Prima Coal (KPC) before it closes the transaction.

Bapepam Chairman Herwidayatmo said on Friday that the requirement was part of measures to help ensure transparency.

He added that the planned acquisition must be approved by the minority shareholders.

Herwidayatmo explained that Bumi must unveil details about KPC, the transaction value, reasons for the acquisition, and the impact on the company's financial performance.

These must be published in a newspaper of national circulation at least 28 days before the shareholders meeting.

Bumi Resources must also appoint an independent party to do an appraisal on the value of the transaction.

"We have talked with them (Bumi Resources officials) ... As a publicly listed company, Bumi Resources is required to follow a number of procedures to ensure transparency," he told The Jakarta Post.

"Whether or not the transaction can be closed will depend on the shareholders meeting which probably will be held within three or four months."

He added that Bumi Resources will submit a full written report on the transaction to Bapepam next Monday.

The planned acquisition of KPC has gained media attention especially after Anglo-Australian mining group Rio Tinto and British-American energy giant BP Plc, both equal owners of East Kalimantan-based KPC through their respective overseas registered investment vehicles, announced that they would sell their overseas registered firms to Bumi. The deal was made at a time when a team set up by the Office of the State Minister of State Enterprises was in the process of finalizing talks with the East Kalimantan administration and state-owned coal mining firm PT Tambang Batubara Bukit Asam, in which the latter two would purchase a 51 percent stake in KPC. The minister was apparently infuriated.

Under a 1982 mining contract signed with the central government, KPC is required to divest a 51 percent stake to local investors. But the divestment process has been delayed for years partly due to a dispute with the local administration. The government then set up the special team to help facilitate the divestment process and decided that the controlling stake in KPC would be sold to East Kalimantan government-owned company (31 percent shares) and Bukit Asam (20 percent shares).

Another point of controversy is that BP and Rio Tinto sold the entire KPC stake at a value of US$500 million, which is much less than the $822 million valuation made by the government.

There are also questions over why the foreign investors had suddenly pulled out of KPC, which is the country's largest and most profitable mining firm producing some 18 million tons of top quality coal per year for the export market.