Mon, 24 Jan 2000

East Kalimantan wants to obtain 51% stake in KPC

JAKARTA (JP): The East Kalimantan provincial administration has expressed a keen interest to acquire a 51 percent stake in coal mining company PT Kaltim Prima Coal (KPC), a senior official has said.

The Ministry of Mines and Energy's secretary-general, Djoko Darmono, said on Friday that the East Kalimantan administration, in which KPC operates, had asked the central government for an earlier divestment of KPC's majority shares to enable it to purchase the majority stake in the company.

"We've talked with the East Kalimantan local administration and they intend to buy KPC's majority shares now," Djoko said.

Under its contract of work (COW), KPC is required to gradually divest 51 percent of its shares between the fifth and 10th year of commercial production, which started in 1992.

KPC, a joint venture between Anglo-Australian mining firm Rio Tinto and the United Kingdom-based British Petroleum-Amoco PLC., might choose either the Indonesian government, local companies or individuals as the buyer of its stake.

At present, KPC is required only to divest 30 percent of its stake, then, another 21 percent within the next four years.

Djoko said the East Kalimantan administration did not object to buying 30 percent this year but it wanted assurance that it would be given the privilege to gradually buy the remaining 21 percent until 2003.

"We're studying their offer," Djoko said.

He said the central government had yet to obtain data supporting the province's claim that it could afford US$175 million for a 30 percent stake at KPC.

He said the only confirmation of the province's financial potency came from East Kalimantan's governor Suwarna Abdul Fatah.

Buying the 51 percent stake in KPC would cost the province about $300 million, he added.

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

Djoko said the East Kalimantan administration must also submit a detailed explanation on how it would plan the future of KPC.

He feared that without a clear vision of the provincial government, KPC would become a nest of corruption, collusion and nepotism practices.

"We don't want any problems arising after a deal has been made," he said.

Separately, Rio Tinto's president in Indonesia, Noke Kiroyan, advised the government against granting East Kalimantan's request, saying that it would violate the COW.

"We should stick to the divestment steps as stated in the contract," he told The Jakarta Post over the weekend.

He said if the government decided to ignore the contract, it would have a negative effect on the mining investment climate in Indonesia.

East Kalimantan became the sole bidder for KPC's shares following last year's withdrawal of publicly listed tin company PT Timah, which considered the share price too high. (03)