East Kalimantan to sue KPC, others

East Kalimantan to sue KPC, others

Fitri Wulandari, The Jakarta Post, Jakarta

The East Kalimantan provincial administration is preparing a
lawsuit against Rio Tinto, BP Plc, coal mining firm PT Kaltim
Prima Coal and Bumi Resources in its bid to unveil possible shady
deals behind the acquisition of KPC by Bumi Resources.

"The lawsuit aims to reveal oddities and secret agendas
surrounding the transaction they (Rio Tinto and BP Plc) had
announced earlier," P.D.D Dermawan, a lawyer with the East
Kalimantan provincial administration, told The Jakarta Post by
email on Monday.

Dermawan did not say when the province would lodge the
lawsuit.

The provincial administration is not the only one who plans to
sue the four. Several groups representing the East Kalimantan
people are also planning to lodge a class-action lawsuit against
them, Dermawan said.

"East Kalimantan people will file a class-action lawsuit
against BP, Rio Tinto, and KPC as well as all parties who
colluded with them, including Bumi Resources," Dermawan stated.

The planned lawsuit and class action comes in response to the
sudden decision by Anglo-Australian firm Rio Tinto and Anglo-
American energy giant BP to sell all their shares in KPC to Bumi
Resources for US$500 million.

BP and Rio Tinto owns a 50 percent stake in KPC respectively,
through their respected overseas registered investment vehicles.

KPC operates a huge coal mining site in Sangatta, Kutai Timur
regency, producing about 16 million tons a year. Some 96 percent
of the high quality coal is exported to international markets,
generating $450 million in revenue each year.

The acquisition caused a furor as it was done at a time when a
team set up by the State Ministry of State Enterprise was in the
process of finalizing talks with the East Kalimantan
administration and state coal mining firm PT Tambang Batubara
Bukit Asam on the purchase of KPC's shares. The province and the
state firm would purchase a 51 percent stake in KPC.

The coal agreement signed by KPC's shareholders in the 1980s
obliges them to sell up to 51 percent of their shares in KPC to
the government, Indonesian nationals or Indonesian companies
controlled by Indonesians.

But the process deadlocked for years due to the dispute over
various issues, including the price of the shares, and East
Kalimantan's ambition to take all the 51 percent stake.

Last year, the government decided that the East Kalimantan
provincial administration may buy 31 percent of the shares, while
Bukit Asam may buy the remaining 20 percent.

It was also agreed that 100 percent of KPC shares was valued
at US$822.

The acquisition of KPC by Bumi Resources has also become
controversial because the price paid by the company for the
shares was much lower than the price previously agreed by KPC's
shareholders and the central government.

"The $500 million is indeed too cheap and indicates possible
shady deals between BP and Rio Tinto," Dermawan added.

Dermawan said based on the coal contract, the price of offered
shares should be agreed by the government and KPC.

"The question is, does the government agree on the price?"
Dermawan questioned.