East Kalimantan drops lawsuit against KPC

The Jakarta Post, Jakarta

The East Kalimantan provincial administration has lifted a lawsuit against coal mining firm PT Kaltim Prima Coal (KPC), a move that would pave the way for the long-stalled divestment of KPC's 51 percent stake to local players, a senior government official said on Tuesday.

Director General of Geology and Mineral Resources Wimpy S. Tjetjep said that the East Kalimantan administration had ordered its lawyer to drop the case.

"Now it's only a matter of coordination between lawyers (of both sides) and the court," he said.

KPC, which is equally owned by Anglo-Australian mining group Rio Tinto Ltd. and Anglo-American energy group BP Plc., is obliged to divest 51 percent shares to local investors.

The central government has appointed the East Kalimantan provincial administration as the preferred bidder for the KPC stake.

But the divestment process had been in a stalemate due to disagreement over the price of the shares.

The provincial administration then filed a lawsuit in October, alleging that KPC had deliberately delayed the divestment program. It demanded some $776 million in compensation from KPC and threatened to annul the company's work contract.

It was only earlier this month that the central government and KPC agreed to value 100 percent of the shares at US$822 million.

The East Kalimantan administration was also reportedly satisfied with the price. The administration then agreed to drop its legal action.

A government source, however, said that one remaining problem for the completion of the divestment program was a demand from KPC shareholders to hold an open tender for the stake instead of naming the East Kalimantan administration as the preferred bidder.

KPC began operations in 1992 in Sangatta, East Kutai regency, East Kalimantan.

It has an annual output of about 15 million tons, exporting substantial volumes to South Korea, Taiwan and Japan.