East Kalimantan files legal suit against KPC

East Kalimantan files legal suit against KPC

Moch. N. Kurniawan, The Jakarta Post, Jakarta

The East Kalimantan administration has filed a civil suit
against coal mining giant PT Kaltim Prima Coal (KPC) over delays
in the firm's divestment program.

KPC said that the legal suit was filed by the East Kalimantan
government at the South Jakarta District Court, requesting that
the company pay some US$772 million in damages and another $4
million for legal costs.

The claim has also been made against KPC shareholders, some of
its directors and legal advisers.

The provincial administration also asked the court to seize
KPC assets.

"We were informed by the court about the civil suit early this
month and were summoned to attend the first trial on Oct. 23," PT
Rio Tinto Indonesia spokeswoman Nunik Maulana told the Jakarta
Post.

Anglo-Australia mining group Rio Tinto and British-American
oil and gas firm BP have equal ownership in KPC.

Nunik said the legal suit had no grounds and the company
intended to defend itself vigorously to the full extent of the
law.

Nunik added that KPC would remain committed to continuing its
divestment program despite the charges.

However, she said, the action taken by the local government
would create anxiety among investors in the whole country and
could deter future investment.

KPC is obliged to divest a 51 percent stake to the East
Kalimantan provincial administration. The divestment program was
supposed to be completed by the end of this year but due to a
protracted dispute over the price, the central government and KPC
recently agreed to delay the deadline until March 2002.

KPC has set the price for its 51 percent stake at US$448.8
million, while the East Kalimantan provincial administration is
only willing to pay $319 million.

KPC operates a huge coal mine in Sangatta, East Kutai regency,
East Kalimantan, which produced 13.5 million metric tons of coal
last year. KPC is regarded as producing some of the best quality
coal in the world.

KPC was required to gradually divest its stake to local
investors from 1996 but various problems have resulted in the
program being continually delayed.