E. Kalimantan bid to buy KPC shares studied: Official

JAKARTA (JP): The government will examine the source of funds to be used by the East Kalimantan provincial administration in acquiring shares of mining company PT Kaltim Prima Coal (KPC), a senior official said on Friday.

The Ministry of Mines and Energy's secretary-general, Djoko Darmono, said it was yet unclear how the provincial administration would fund its acquisition plan.

"We still don't know whether domestic or foreign investors are behind the funding," Djoko told reporters.

He noted that under the contract of work (COW) awarded by the government to KPC, the provincial administration was not allowed to form partnerships with foreign investors to acquire KPC's shares.

Under the contract, KPC must gradually divest its shares up to 51 percent between the fifth and the 10th year of commercial production, which started in 1992. This year, it must divest 37 percent.

The company, a joint venture between Anglo-Australian mining firm Rio Tinto and British Petroleum-Amoco PLC., must divest its shares to the government, Indonesian-owned companies or Indonesian citizens.

The provincial administration has asked the government's permission to buy the shares and said it would form an alliance with a private company to buy them.

"We've agreed to form a team consisting of officials from the ministry of mines and energy, the East Kalimantan provincial administration and KPC to discuss where exactly the funds would come from," Djoko said.

The province, he added, should also explain to the team its plan for the future management of KPC.

Djoko has expressed worries that without a clear vision for the provincial administration, KPC would become a nest of corruption, collusion and nepotism.

"As soon as the team gives its go ahead, the provincial administration might proceed with an acquisition plan," he said.

Djoko said the provincial administration had even proposed to acquire the entire 51 percent of KPC's shares.

"The study by the team would also include the possibility for the province to own up to 51 percent of KPC's shares," he said, adding the 51 percent shares were valued at US$300 million.

Djoko added that East Kalimantan's governor Suwarna Abdul Fatah maintained that the province could afford the shares but he did not elaborate on its financial capability.

KPC, with an output of 15 million metric tons per year, is considered to be one of the world's largest coal mining companies.

East Kalimantan became the sole bidder for KPC's shares after last year's withdrawal of publicly listed tin company PT Timah, which found the share price to be too high. (bkm)