Tue, 29 Jul 2003

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.